British inflation figures-fantasy or what!

With the price of everything seemingly rising by at least 10% annually(and some items by a damn sight more than that),how can the present excuse of a government plausably claim that the anual rate of inflation is 2.5%?.

Obviously they will raise pensions by this amount(or less),but will the 'official' rate of inflation be used to calcuate the next pay rise for our such hard-working Members of Parliament?.

It would seem the government are out to screw everyone but their rich friends with their flash-arrsed accountants into the ground.

The "official" rate of inflation is the CPI, Consumer Price Index, which was adopted in 1998 to bring us into harmony with the Eurozone. It's tracked by a "basket" of common consumer items, but doesn't include a lot of common expenditures to do with housing - notably, mortgage payments, council tax, and many costs involved in buying or selling a house.

It does allow us to track inflation accurately in comparison to the rest of Europe.

It replaced RPI-X (and was, and is, approximately 1% lower at the time), which was calculated on the basis of a similar basket of consumer items, including all costs relating to housing but not mortgage repayments. RPI is the same, but including mortgage repayments, and is a little higher again.

What's happening at the moment is that different sectors are being hit by differential rates of inflation: some items - petrol, foodstuffs, alcohol, school fees - are suffering extremely high rates of inflation, due both to taxation and raw price rises. Others - computers, holidays - are subject to very low rates. The CPI is where the government says it is, at around 2.5%, and they are basing pay offers on this.

For some people, inflation in real terms is much higher, because of their consumption portfolio.

Of course, if everything goes on expenses anyway, you don't notice how bad inflation is getting...


edit: forgot to mention. NS&I index-linked savings certificates are still based on RPI + ~1%, and are tax free, with no limits on how many you can hold. Though this isn't financial advice, they are quite a good cash investment at the moment.

it will be interesting to see how the falling pound effects import prices.
If this is a long term trend we could see a resurgence of manufacturing industry.

The effect on defence may also be significant,the Nexter VBCI just got a lot more expensive for example.
Does anyone know anything about how we pay for projects like the M.A.N trucks and whether we hedge against exchange rate inflation?
If we pay upfront there is no problem but if we do not the defence budget may be squeezed once again.

tangosix said:
If this is a long term trend we could see a resurgence of manufacturing industry.
Not really as what goes down can go up again and who wants the exposure, it will however defend what we have with some expansion

tangosix said:
Does anyone know anything about how we pay for projects like the M.A.N trucks and whether we hedge against exchange rate inflation?
:lol: guess
So basically they assume that you eat a cheap Chinese television set every month then?;)
Pa McHasBean Broon's 'True' UK inflation figures of around 2 Percent is 'phoney-baloney' just like NUoo Labour is. If the old system of calculating inlation was used, then that 2 Percent or 2.5 Percent is more likely to be double to around 4.5 % or higher.

Its just the same with the monthly unemployment figures. When the Conservatives were in power, Labour were always complaining that these figures were 'massaged', and they were. Long term unemployed were put on Incapacity Benefit, or the then equivalent.

NUoo Labour now are just continuing this 'massaging' of the figures. Inflation figures are arrived at in just the same way. Change the way the figures are arrived at, and wow!, you can acheive the 'results' you want to acheive. Current figures dont even take into account the massive rises in energy costs of gas and oil. The current system has not even taken into account the rise in basic food prices recently.

Wait until the April figures are published, then that will make Pa Broon's much vaunted 'Prudence' look slightly wonky to say the least.... :?
Talking to a friend whose son starts at University this September.

Student Loans do not attract "interest" but an RPI related charge so they supposedly cost nothing.

RPI rate currently used? 4.8%
Perhaps we should adopt politicians pay rises and rises in their expenses as an indicator of the true rate?

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