So that’s all fine then. Inflation has fallen to 4.6% and Rishi Sunak is a hero for delivering on his promise?
Err, no.
The champagne corks popping in Downing Street are a bit premature and research commissioned by the Liberal Democrats shows why. Commons Library and Liberal Democrat research shows that average earners have seen their annual wages eroded with a real terms cut of almost £700, the equivalent of a 3p rise in Income Tax.
Our Treasury spokesperson Sarah Olney MP said:
Rishi Sunak congratulating himself over today’s figures will be cold comfort for all the hard-working people still bearing the brunt of this Conservative chaos.
For months on end, people across the country have been watching as their pay cheque gets squeezed from all sides, draining every spare penny. From the ever-increasing cost of the weekly shop to skyrocketing mortgage payments.
Enough is enough. With next week’s Autumn Statement the Government must properly help families and pensioners struggling with the cost-of-living crisis and give our NHS the funding it desperately needs.
Energy prices are a massive factor in the fall in inflation, yet people aren’t necessarily going to feel that, given that the help given by the Government in 2022 isn’t being repeated. When they go to the supermarket, they will continue to be shocked at how much their normal shopping costs. I mean, my usual butter is the same price as last year, but the manufacturer has reduced the size of the tub from 500g to 400g. A sneaky way of introducing a 20% increase in price.
The more the Government congratulates itself for meeting the target the Bank of England always said it was going to meet without any effort on its behalf, the more out of touch they will seem.
* Caron Lindsay is Editor of Liberal Democrat Voice and blogs at Caron's Musings
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5 Comments
Can someone explain whether price calculations take accounnt of the government help for energy costs and things like the smaller sizes of packs of butter ? If these figures only take into account the advertised prices and ignore this, then we are being deceived. I think our party experts should look at this and establish the truth. It could be extremely important for political messages.
Actually, reducing the size of the butter tub from 500g to 400g while keeping the price the same actually represents a 25% price increase (rather than 20%). To illustrate, buying 5 tubs of the new sized tub is equivalent to buying 4 of the old size…but will cost 25% more since the price of the tubs has remained the same.
The CPI figures are based on actual retail prices paid by households for energy costs. I think the point being made by Sarah Olney is that while energy prices have come down somewhat the withdrawal of energy support benefits made available last winter will mean that most households will not see any significant reduction in their net energy payments. Things like the smaller sizes of packs of butter are adjusted for and price increases related to improved quality of goods or services are adjusted downwards (so called hedonic or quality price adjustments) Consumer price indices, a brief guide
“Explicit adjustments are made, for example, in the case of personal computers, where most replacement models are of higher quality than their predecessors. A rise in price might be accompanied by improvements in processing speed, for example. In this case, an index that did not take account of improved quality would show higher inflation than an index that does adjust for quality change.
A simpler example occurs where a manufacturer changes the size or weight of a product. For example, this has happened with the size of some confectionery products being reduced. Not adjusting for this change would result in an index showing lower inflation than an index that is adjusted for the change.
In this way, quality adjustment helps to focus the index on “underlying” price changes for a fixed basket of goods and services.”
The CPI index has increased from 113 in Oct 2021 to 132 today i.e. cumulative price increases of 17% over last 2 years.
Thanks for showing up my dodgy numeracy @mary.
Well as predicted over a year back inflation would fall…
What is interesting, no one seems to be interested in digging into the data to understand why it has fallen and thus the factors that actually caused it to fall and lessons.
I expect much of the cause wasn’t the below inflation pay increases paid to doctors, nurses, teachers etc., but other factors beyond the control of ordinary people and UK government…