inflation smokescreen

For the past few years, I’ve been amazed at how little is made of the fact that Gordon Brown changed the rate inflation is measured from the Retail Price Index to the Consumer Prices Index. We know why he did it of course, and that was to make his target easier to attain whilst ramping up public spending. The problem is we now have an inflation figure that no one trusts and bears no relation to the costs people are facing.
 
Today the rate went to 2.1%. Now when I think of living costs, there is food which has been ramped up, fuel which means motoring and heating costs have been ramped up by double digit percentages and nothing going down in price. The idea of 2.1% is a joke. Much more realistic is the 4.2% RPI index which is what employers have to use the pay settlements (because the unions would destroy them for using the CPI).
 
So what is the point of the CPI? No one believes it, and it is hiding the real problem of inflation in the economy at a time of economic slowdown. If Gordon Brown was interested in candid Government, he would scrap it and allow the bank to deal with the proper inflation rate which is overshooting its target by 2%. Much of which is being caused by fuel, of which the Government is taking 76% in duty and VAT and which it added 2.7 pence last month.
 
The Government needs to work with the Bank of England to sort out these problems before they escalate, and getting rid of unrealistic measures like the CPI would be a start. However, after Northern Rock, can anyone have confidence that they can work together?

 

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