Inflation ‘falls’ while the cost of living continues to rise: which planet are these economists on?

Today’s inflation figures will prompt many readers who must pay their way in the real world to wonder which planet the economists are on.

We are asked to believe that inflation has ‘fallen’ to 3.6pc, as measured by the Government’s preferred benchmark of the Consumer Prices Index (CPI) or 3.9pc on the more widely-based Retail Prices Index (RPI). Neither figure reflects the experience of anyone who has had to pay gas or electricity bills recently or had to buy something as mundane as a railway ticket.

The explanation, of course, is that the increase in Value Added Tax from 17.5pc to 20pc in January, 2011, has now dropped out of the figures measuring the annual rate of increase in inflation – but VAT and inflation are continuing to increase, not decrease, the cost of living.       Read More