In his Economics Made Easy column in the magazine last week, Allister Heath pointed out that the Consumer Price Index (CPI), the debased European measure of inflation which Gordon Brown insists on using – stands at 2.8 per cent, while the more realistic Retail Price Index (RPI) is at 4.5 per cent and Allister’s personal rate – according to the calculator thoughtfully provided on the Office for National Statistics website – is at around 6.6 per cent.
The difference behind these figures is that the CPI is based on the prices of a basket of goods which includes fast food, supermarket clothing lines, and consumer electronic goods (all of which remain relatively cheap and some of which are still falling in price) and excludes housing costs including mortgages. But professionals like Allister spend much more proportionately on services, school fees and housing costs, all of which are rising rapidly in price. So personal inflation rates for the middle classes are genuinely much higher than the CPI – and this isn’t just a way of whingeing at Gordon Brown.
But how much higher, generally? I went to lunch with some rather grand private-client investment managers in the City today, and they told me that their target, for wealthy private clients and charities, is to produce portfolio returns of ‘RPI + 3.5% – that is, 8 per cent, just to keep abreast of real inflation. Indeed, for charities or families that happen to be engaged in major building works, for example, that could be RPI + 8 or worse – serious double-digit inflation, the like of which we haven’t seen since the end of the Eighties. And the experts at the table thought it would go higher still (as cheap imports become less cheap) before it can be brought under control.
What’s your personal inflation rate? Which items that you regularly spend money on have been rising fastest in price? What would be in your basket of goods? Give us the data, and we’ll construct an authoritative Spectator Price Index.
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