It’s the new financial year next week, and for anyone running a company, it’s the start of the big blow of higher National Insurance Contributions, the increase in the minimum wage, and the surge in business rates. 

We know pretty much how firms are responding. Some are cutting their staff. A few sadly are shutting up shop – walk down your High Street and count the voids.

And those that struggle on are upping their prices. So there is a big jump in inflation on the way.

Rachel Reeves celebrated the fact that the Consumer Prices Index had come down – to 2.8 per cent – in February, but the CPI is an unrealistic measure.

The Chancellor didn’t mention that the Government’s preferred indicator, CPIH, which includes owner-occupied housing costs, was 3.7 per cent. Or that the old Retail Price index, used for the Government’s own index-linked bonds – gilts – and for many commercial contracts, was 3.4 per cent. And all this is before the April inflation blow hits.

We won’t know until May 13 the scale of the damage, but I can see numbers above 4 per cent in there somewhere.

Hard times: Thanks to Rachel Reeves, the start of the new financial year is a big blow for anyone running a company

Nearly every council is putting up its rates by 4.99 per cent. In Bradford, it’s 10 per cent, and in Newham, in North-East London, and in Windsor and Maidenhead it’s 9 per cent.

At least 13 areas in Scotland are increasing rates by 10 per cent or more, and in Wales, the range is between 5 and 9.2 per cent. 

Most mobile phone contracts are linked either to CPI or the RPI, so those too are going up.

You have probably received an email or a letter from your gas or electricity supplier confessing that they are unfortunately having to increase their charges, blaming it on global politics or conflict in the Middle East or some similar guff. 

The cap is going up by 6.4 per cent in April.

This is not to get at the Office for National Statistics, or indeed the Bank of England, but the idea that inflation is only 2.8 per cent and is going to get down anywhere close to the target of 2 per cent next year just isn’t credible. It doesn’t square with the bills we already know we have to pay – or what common sense tells us about what is going to happen in the summer and beyond.

So it is unsurprising that people have been desperately putting money aside to pay for these increased charges. The household savings ratio is at its highest since the pandemic. And all this has been happening before there was the hint of some sort of tariff war from across the Atlantic.

Price increases are bad enough, but it’s not just prices. It’s about tax. Ask yourself this question. Do you think that Reeves is going to put taxes up or down in her next Budget in the autumn?

So if the 2 per cent target is not credible – and I really think it is for the birds – what should we do?

I suggest that we should hope for the best, but be resilient and plan for the worst. If inflation hits 4 per cent and then gets stuck at 3 per cent or more, it is going to be very hard for the Bank of England to cut interest rates.

The financial markets still expect some decline in rates this year, though they have become a little less confident than they were even a few days ago. I think it is not impossible that the next move in interest rates will be up, not down.

It is perfectly plausible that the cost of longer-term borrowing will go up too. The ten-year gilt yield on Friday was around 4.75 per cent. It was below 4 per cent a year ago. Suppose it goes to 5 per cent or more. It would make sense for anyone borrowing on a mortgage, or indeed for anything else, to lock in at whatever they can get now.

We have to assume, too, that the real value of our savings will continue to be savaged, so we should put them into anything that gives protection.

It may not be the best idea right now, as the gold price is at an all-time high, but there has been a lot of money going into jewellery.

My own view, for what it’s worth, is that UK equities remain a decent buy.

The one thing I am sure of is that inflation will be even higher than official forecasts. Sorry, but forewarned is forearmed.

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