Home heating oil, petrol and diesel prices could rise after the crash in the value of the pound, NI economist warns

The pound plummted to a record low against the dollar and was worth just $1.03 in early trading on Monday, before rebounding slightly to $1.09.

The crash in the value of British currency followed Chancellor Kwasi Kwarteng’s so-called ‘mini budget’ on Friday, which set out the biggest programme of tax cuts for 50 years using more than £70 billion of increased borrowing.

Dr Esmond Birnie, an economist at Ulster University, told the News Letter the fall in the value of the currency against the dollar will likely mean goods become more expensive for the average Northern Ireland consumer.

“I’m old enough to remember a time in the mid ‘80s when it [the value of the pound] was approaching parity [with the dollar], but this time it seems it has gone even further,” he said.

“What are the implications for the man and woman in the street? It does matter. Sometimes people will think it’s all very remote, but it matters in a number of ways.

“One immediate way it matters is that anybody who is going on a holiday, particularly a holiday to the United States, they’re not going to get a good exchange rate.”

He continued: “There is a particular Northern Ireland point in terms of dearer imports. To the extent that the pound is falling against currencies in general, but obviously the dollar is one of the most important global currencies, it makes goods and imports more expensive – it adds to the inflation and cost-of-living problem.”

He highlighted home heating oil, in particular, as something that will likely take an even greater toll on stretched household finances.

“One very particular example of this, which is very important, is oil,” he said.

“It’s an historic feature of the oil market that prices are always set out in American dollars, that’s just the way it works.

“Therefore what this is going to imply is that oil, hence the cost of home heating, becomes more expensive.

“We know Northern Ireland is peculiarly reliant on that, something like 60-70% of households using oil unlike the rest of the United Kingdom where people are mostly using gas.

“So oil becomes more expensive and home heating becomes more expensive. There could be an impact in terms of diesel and petrol at the pumps.”

The new Chancellor Mr Kwarteng and the new Prime Minister Liz Truss have defended their growth plans package, despite analysis suggesting the measures – which include abolishing the top rate of income tax for the highest earners and allowing bankers’ bonuses to increase – will see only the incomes of the wealthiest households grow while most people will be worse off.