GUEST BLOG POST FROM RICHARD LYNCH ON INFLATION

Just how bad is UK inflation?

UK inflation is now at its highest level for over 20 years and prices are rising faster here than in almost all of our European neighbours and global competitors. The figures for the year to end September 2011 (with August figures in brackets) show the following increases, together with some frightening underlying increases:

Retail Prices Index (RPI) – 5.6% (5.2%)

RPI excluding mortgage interest (RPIX) – 5.7% (5.3%)

Consumer Prices Index (CPI) – 5.2% (4.5%)

The main reason for the rise in the RPI was an 18.8% increase in the cost of fuel and light, which included a 28.2% increase in the cost of domestic oil and other fuels, a 22.4% increase in the cost of gas and a 12.9% increase in the cost of electricity. Other reasons for the higher RPI included increases in the cost of tobacco (13.1%), clothing and footwear (11.1%), motoring expenditure (8.7%), fares (8.5%) and food (6.9%). Leisure costs, however, had a negative effect on the figures and cost of leisure goods actually fell by 2.4%.

The main reason for the rise in the CPI included increases in the cost of gas (13%), alcohol and tobacco (10%), transport (8.9%), electricity (7.5%) and food (6.4%).

The RPI is now at its highest point since June 1991, when John Major was Prime Minister, and it has been at or above 5% on ten occasions in the year and a half since the coalition took office. By way of comparison, it only reached or exceeded 5% on four occasions during the 13 years of the previous Labour government. The CPI is also abnormally high and its current level of 5.2% has never been exceeded since the index came into existence.

This CPI figure is also higher than comparable figures in Ireland (1.3%), France (2.4%), Germany (2.9%), Greece (2.9%), Spain (3%), the EU as a whole (3.3%) and Italy (3.9%). In fact only one EU country has higher CPI inflation than the UK – Estonia at 5.4%. The difference is even more extreme when we look at non-EU competitors, including Japan, which has zero inflation and the US, which has 0.3% inflation – 17 times lower than our figure!

And what we thought was the one bit of slightly good news, namely that state pensions and benefits would be going up by 5.2% (the September CPI figure) next April, is being questioned. George Osborne, the Minister for Misery, has now announced a review of the link with the September inflation figure and is considering a freeze or sub-inflation increases in these benefits instead!

Richard Lynch is a Dudden Hill resident. He is a retired Unite the Union official and currently conducts voluntary work on employment rights for the Brent Community Law Centre. He also acts as an accompanying representative for the GMB union.

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