inflation 2%

  sunny staines 22:28 15 Jan 08
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With costs of petrol, gas/electric, council rates, food, rail fares all on the increasing at a such a fast rate. How does the Government come up with inflation at around 2 per cent and recommending pay rises at this level when all the above have risen many times way above 2 per cent.

people on pensions and inflation linked pay rises are loosing out greatly on available spending money after bills.

Or have I got all this wrong?

  Forum Editor 22:55 15 Jan 08

averaged over 13 per cent per year during the 1970s, peaking at 27 per cent in 1975. In the 1980s inflation averaged 7 per cent per year.

Between 1993 and 2003, inflation hovered between 1 and 4 per cent per annum, and averaged 1.2% between 2000 and 2005.

All kinds of things affect inflation,some of them - like the price of oil (and consequently petrol) are beyond our direct control, and some of them can be controlled by government. One random example of how inflationary factors could be controlled by government (but sometimes aren't)is illustrated by the question of car tax dodgers. About 1 in 15 of the 33 million vehicles on the roads is untaxed, and in addition to the revenue lost because of that the DVLA estimates that 80% of untaxed vehicles also have no insurance. Uninsured motorists are ten-times more likely to be convicted drink-drivers and are many times more likely to be involved in hit-and-run incidents. These uninsured motorists add £30 to the average car insurance premium.

In 2003 the Bank of England’s target inflation rate changed to the Consumer Price Index (CPI), which arrives at the rate of inflation by looking at 56 separate component prices. The CPI has faults. It does not include house prices or council tax, but it's useful because it is constructed on the same basis throughout Europe. Accordingly it provides an objective comparison of Britain’s inflation record relative to Europe.

  Stuartli 15:04 16 Jan 08

May I offer a slight correction to the year?

It was 1976, under the then Labour government, when inflation reached 26.9 per cent; as a result the IMF agreed to a request from Labour for a £2.6bn loan, providing a number of conditions were met.

In time the Winter of Discontent arrived (remember Callaghan's "Crisis, what crisis?" as he arrived back in the UK?) and the Conservatives regained power in 1979.

As had always been the case till then, the Tories dug the country out of the economic mess left by a Labour administration.

The current government actually inherited a sound economy and unemployment figures which had been steadily dropping for five or six years in succession.

  Stuartli 15:06 16 Jan 08

Only politicians actually believe that inflation is currently 2.1 per cent - but, of course, they don't live in the "real world"...:-)

  anskyber 15:11 16 Jan 08

RPI is in fact 4%. click here Pensions use RPI for inflation purposes although CPI is used for pay settlements.

  pj123 15:19 16 Jan 08

The FE quotes: "About 1 in 15 of the 33 million vehicles on the roads is untaxed, and in addition to the revenue lost because of that the DVLA estimates that 80% of untaxed vehicles also have no insurance."

The DVLA, and come to think of it, the TV Licencing Authority have both said:

"We know who you are"

If that's the case why aren't they doing anything about it?

  oresome 16:09 16 Jan 08

National inflation figures are meaningless on an individual basis.

For example, I have a very small income and therefore a disproportionate amount of my income is spent on utilities, council tax and food etc compared to the national average income.

To give two recent increases, my fuel bill has risen from £59.00 to £116.00 per month this year and water from £29.88 to £43.00 following annual reviews.

My spending is mostly confined to essential goods and services that suffer inflation that is much higher than the official figure.

The fact that some discretionary goods have price deflation is of little benefit to me, but will offer some compensation to others with the money to purchase them.

Many people will be faced with a decision when they retire as to whether to take a higher fixed monthly payment from a pension annuity, or to accept a much lower index linked payment that increases year on year with inflation.

The age point where the index linked pension exceeds the flat pension is usually around the mid to late seventies mark and most people opt for more money now.

But be aware that the inflation rate for this group of people can be very much higher than the official figure and will quickly eat into the spending power of a fixed income.

  georgemac © 17:23 16 Jan 08

is of course correct, inflation is currently much higher for low income groups who spend the majority of their money on food, fuel.

CPI does not include council tax, well now we know why this has increased by so much over the years, a stealth tax that does not increase inflation, but again inflicts more pain on the less well off.

From a "Social" government?

  Stuartli 17:55 16 Jan 08

>If that's the case why aren't they doing anything about it?>>

I can assure you that the DVLA and the police are certainly doing something about it and with very high levels of detention.

  sunny staines 18:47 16 Jan 08

i am retiring in a couple of months and i see my available cash to spend dropping each year as a result of how these figures are worked out

  pj123 18:48 16 Jan 08

Stuartli, where do you get your assurance from?

"with very high levels of detention."

Do you mean detection?

So I still won't get a reduction on my car tax then?

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