Inspired by an excellent article in The Telegraph today, I wanted to draw your attention to a gimmick they have which is actually quite useful. They provide a calculator in conjunction with Capital Economics (the hawkish one of the professional economics houses) that calculates your inflation based on your spending, here it is.
My rate was 5.8% for November 2006, an increase of 0.3% over October alone. Sadly my pay review is based upon the RPI rate of 3.2%.
This calculator at least can give one a reckoning of the real costs increases they face. It also shows up the flaws in CPI. The CPI basket is now deeply flawed as a tool for estimating inflation. So bad that the ONS is going to bring our a similar calculator to this one (great, more public money spent where private money has already provided a solution).
One final key point that arises from this is that it occurs to me, not only that the working, property owning, family raising people are most affected by inflation (along with property owning pensioners); but that as usual the feckless who have no rent, possibly no job and spend their money on short-term material goods are rewarded with a near deflationary environment. Where is their incentive to change behaviour?
How galling it is that government policy come to be so skewed to traditional Labour voting classes, even in what should be a neutral system of calculating inflation. Don' t just blame the EU for inflicting CPI on us; the ONS chooses the basket and has done a terrible job (see previous posts in the archives).