Should we have a national ‘no spend August’ to help lower inflation?

[ALady78]

Like many people I’m really concerned about high interest rates. We’re actually still in a fixed rate mortgage deal until early 2025 so I was hoping things would calm down by then. But now they’re saying interest rates will have to go higher than previously thought and I’m already panicking about what we’re going to do.

So if the idea behind higher interest rates is to curb spending then why haven’t they clearly said this? I’ve got this from the Bank of England website today:

‘Higher interest rates will make sure inflation comes down by affecting spending habits in the UK.

This happens most directly if you have a mortgage or you are paying back a loan.

Either way, you may have to spend more on these things. And that means you will have less to spend on other things that are captured in theConsumer Price Index (CPI) measure of inflation. This is the measure of inflation that the Government asks us to target.

Food, housing, transport, and household bills are everyday essentials. You can’t choose not to spend on those. But you may put off buying other things.

Also, higher interest rates may mean you are less likely to want to take out a new loan to buy things unless you need to.’

If this is the case shouldn’t we all stop spending immediately on things which aren’t essential? No new household items, takeaway’s, days out, clothes etc. I’ve carried on as normal at the moment because we can, but I would stop if it would help. I mean, I know they always say ‘interest rates have been increased to curb spending’ but then why doesn’t Rishi hold a press conference and CLEARLY request us to stop buying ‘stuff’ if that’s what they need us to do?

Is the solution for us all just to stay in and buy only basic food for the rest of the summer?
But then won’t people who make or provide ‘non essentials’ lose their jobs if we stop so how does that help?

Pointless.

This is supply side inflation though. You’d be better off hoping the situation in Ukraine improves

For them and everyone

Food prices will be impacted again by recent events

Interest rates are not going to suddenly drop. They may drop slowly from 2024, but it may well be that 2/5 year fixes in Q4 2024, Q1 2025 could still be >5%. And beyond that 3/4% fixed rates are likely to be as good as it gets, maybe for the length of your mortgage. I would be thankful that I’d got on the ladder, had >5 years of low rates, and adjust to the new normal. You’ve got 18 months to increase your incomings or decrease your outgoings.

Mmm, I just don't fancy that to be honest.

I don’t understand all the sarcastic comments either. OP makes some good points :’if we all stopped spending on credit (credit cards, buying car on finance etc) then the rates would stop increasing.
Just live within your means and you will be better off overall, what is the issue with that??

Inflation is mainly being driven by food and fuel prices so good luck with this plan.

This.

Also, aren’t the food items most affected by inflation the basic stuff - bread, pasta, baked beans, etc.

It wasn’t the Governor @BustPipes, it was some other highly paid out-of-touch BOE wanker. There’s many to choose from. This particular one is paid £180k pa if I recall correctly 🙄

I think it's because stop buying things that aren't essential and stop using credit/live within your means are two very different arguments, and OP said she wanted us to do the first. Many of us are buying things that aren't essential, that we can afford and that other people's livelihoods depend on.

Our "world beating" energy billls are a big driver of inflation.

Expensive energy adds to the cost of pretty much everything.

Sorry, won’t work for us.

I think it’s all more complicated than that.

Especially as food prices will be going up more once the Tories implement their Brexit border checks.

That take is nearly as weird as OP's original suggestion.

Inflation happens for many many reasons and some of our chickens are coming home to roost - QE, spending during the pandemic, getting used to low interest rtes, no incentive to save, a very long issue with UK productivity, wage demands, early retirement, workers not being able to work because of health issues and the NHS backlogs, labour shortages (nothing to do with Brexit - we are importing more foreign workers just from a greater range of countries), the war in Ukraine and cutting trading with Russia, OPEC, ... the list goes on and on.

www.ft.com/content/3b3ec1be-1dfe-40fd-b8c9-a29314105118

My husband was absolutely gobsmacked to find out recently that our neighbours are going car less for the foreseeable.

Theirs needs some work and an MOT and instead they have decided to sell it or scrap it I'm not sure which and do without for a while.

Like us their mortgage has gone up several hundred pounds a month, their childcare bill has gone up, the food bill is up, their energy bill is up, their council tax is up,

We're in quite a well off area so it's quite surprising to hear someone say they've decided not to chuck their savings at car repairs, or add a new car payment to their monthly outgoings.

And the Tories have lost a couple of lifelong voters.

OP, I asked this before under the Cost of Living topic (Money section). I'm also on the side of low spend but not no spend, purely because I've always been frugal.

The problem is the UK population is addicted to spending and find it hard to stop, unless it was not possible to spend like during Covid lockdowns or during the wars. Life is short, they say. Kids grow up too quickly, they say.

And we need the economy to grow too.

😂

Interests rates don't just impact consumer spending, and it's debatable whether reducing domestic spending will have much impact on UK inflation anyway as much of the inflationary pressures are non-domestic. Interest rates also impact the value of the pound and generally the higher the interest rate the stronger the pound is. So raise interest rates, the pound strengthens and imports cost less. The Bank of England also doesn't have the luxury of operating in a vacuum. If other major economies change their interest rates we generally have to as well just to maintain the status quo.

That'll be exciting.

A modern consumer act to stop rip-offs could lower inflation. No more increases in water bills until there is proper action against sewage dumping. No more oil and energy company large profits without a real windfall tax.

Small businesses have weathered brexit, covid lockdowns, and for most of us right now is the worst time. So it might not help inflation but please do think very carefully about where you cut back and what you personally value. Drop to supermarkets own brand and Tesco will still be there in 2024. Get a more fuel efficient boiler and EOn aren't going to cry that you're spending 20% less on gas. Cut your daughter's coding club, your son's dance class, your hairdresser, the bloke who valets your car and that small one or five person business won't be there when you decide to come back. Mine has had a 70% reduced footfall since November, six of my friends businesses have already shut since March and all of us hate the 'oh no we loved your place' or even worse 'oh no I always meant to come here' posts when we have to put on facebook we're closing. That's a lot of real people without jobs they often loved now. We are on our knees, think carefully about where you spend sure, but the government and the bank of England don't care if you cut back generically 25%, local businesses and services do. I do not believe all businesses have a right to survive, but I do think at present generic 'we should spend less' statements are shortsighted on the immediate impact those cuts are going to have on things people do actually value.

Sounds like a pretty bad idea for the economy generally.

https://www.bbc.co.uk/news/uk-65767982

Yes sounds like a great idea... not.

Not everyone has a mortgage @ALady78 Do you seriously want all those who rent or have no mortgage to stop spending (and crash the economy) so those of us with mortgages pay less?

As a mortgage holder I don't love it when interest rates climb but I accept it happens. Food price inflation is going to continue to be a thing as there are more people in te world competing for food and, oh, Brexit, so again, one to get used to.

I mean, it's true that money goes less far in times of high inflation so purchasing power will be less overall (we are having a new boiler and no holiday this year, previously we might have stretched to both) but to stop spending altogether=madness!