Tonight:
5°c
Only 2.2%? It's hard to believe when the bills come in
Hugo Duncan, Evening Standard12 Feb 2008
Trying to convince someone that inflation is running at just 2.2% is not an easy job. Indeed, the figure seems to bear no resemblance to day-to-day living costs in London or indeed the rest of Britain.
Petrol prices are soaring as a result of the the rising cost of oil and the Chancellor's tax grab. The congestion charge is another burden for drivers in the capital.
Household bills also seem to be burning through bigger chunks of our disposable income as the cost of food and energy bills spirals ever upwards.
Government figures suggest the cost of living is not much over 2% higher than this time last year. But while clothing costs may be down, people need to meet bills and buy food more often than shell out for a new pair of jeans.
The Government's preferred Consumer Prices Index measure of inflation also does not include housing costs.
A more realistic figure is the Retail Prices Index which includes mortgage costs and other household bills. It is running at 4.1% - still low compared with the runaway inflation of the 1970s.
There is, however, more pain to come. Unless Alistair Darling scraps plans to tax fuel by another 2p a litre, petrol will soar even further above £1.
Energy bills are on the rise yet again, with five out of the UK's six suppliers hiking the cost of gas and electricity since New Year.
Mervyn King, a self-confessed "inflation nutter", will be reluctant to write again to the Chancellor about a breach of his 2% target. Unless the economy takes a real turn for the worse, rate cuts now will be gradual and limited.
