CPI up to 2.9% For December.

In message , mick writes

The rate for December was 2.9 against a City predicted rate of 2.6 this is against the falling price of oil a year ago and the cut in VAT that took place at that time. There will be some concern that the rate was above prediction but they are unlikely to act at this time as a rise in interest rates would be counter productive in other areas such as the building industry. The target is 2% if it stays above that level or increases then they may have to consider taking action.

I think it unlikely that interest rates will rise while quantative easing is still continuing. That really would be crazy.

The BoE predicted than inflation will rise in the short term and fall back later this year. In this case it is unlikely that interest rates will rise soon.

The outcome of the general election could change all this though.

In message , Mark writes

It would be but they have returned VAT to 17.5% at a time when they are still trying to stimulate the economy.

Good points, the Country is deep in debt and needs to reduce borrowing which is going to be a long and painful process but it still looks like inflation could go above 3% in the short term and rise further still in the first half of the year which is not something Brown will want to see happen. It will be a difficult balance but I doubt we will see any major steps taken if they can avoid them.

There will have to be some action after the election but with pay levels stagnant, inflation rising and a Government that has to reduce Public Sector borrowing looking for ways to do so we are still in for a rough ride. The threat of inflation is still very real and coupling that with tax increases won't go down well.

Bitstring , from the wonderful person Paul Harris said

And THAT increase hasn't even kicked thru into the inflation numbers yet .. the 2.9% was just the 'real' rate of 15% VAT vs 15% VAT, after nearly a year of 15% VAT vs 17.5% VAT.

.. next month (and for the next years) we'll have 17.5% VAT vs 15% VAT, which has to be worth at least another 1.5%-2% on inflation surely?

Not necessarily, for a start loads of things are VAT free (most food, most housing costs, second hand goods etc) or 5% VAT on fuel which didn't change, and secondly VAT is really a tax on retailers rather than customers, quite a lot of things didn't change in price when the VAT rate went down. Prices are usually set based of what people are prepared to pay rather than eg cost+margin+VAT.

In message , Andy Pandy writes

VAT is only one aspect, we have a large public sector debt and are still borrowing, that has to stop and over time the debt must be reduced. It is probably going to hurt although who and where isn't clear yet but the chances are most if not all of us will feel it. There is still a chance of inflation rising and the Bank won't want to raise interest rates but we could have stagflation. It certainly won't be an easy ride for the next Government whoever is in power and VAT at 17.5% may be the least of our concerns.

I'm sure the BoE took the VAT rise into consideration in their forecast. That's probably why they say it will rise and then fall later in the year.

With the massive tax increases on the horizon people will have less spending money so this could exert downward pressure on inflation.

In message , Mark writes

If they are comparing month to month (Feb to Feb and March to March etc.) then the VAT increase will be there every month throughout the year rather than affecting just the first half.

In message , Paul Harris writes

The CPI means that my Company Pension will increase by 2.9% in Apriol, compared with less than 1% last year. Whoopee!

VAT is the least of my worries. I tend to buy against the trend. The next election is between a bumbling, unattractive bloke who is tackling the economic problems reasonably well, and a clean cut Eton Toff who hasn't a clue what to do other than help his chums by reducing Inheritance Tax. That affects me nearly as much as the VAT rise. ;-)

Everyone I speak to seems to agree that Vince Cable is the only Party spokesman who talks much sense.

Now to serious matters. The gym didn't reduce my monthly fee when VAT was reduced, but I received a letter describing all their new facilities and sneaking in a reference to the impending VAT increase. We'll see.

... Except for not doing the blindingly obvious - allow banks to pay whatever bonuses they like, with no extra tax charge - just as soon as they've repaid me and all the other tax-payers,

Yes (re. treasury issues, at least) - but don't forget that being in power and "doing it for real" is a very different proposition. Obama is starting to recognise this, and even Menzies Campbell couldn't hack it once he moved from "best foreign affairs" spokesman to party leader.

The real shame is that the LD's (thanks to MC) dumped Charlie K - arguably the best leader they'd had for decades.

Surely Governments are playing a dangerous game - Inflation will help "reduce" the huge debts they have incurred in trying to stop the recession After all they have inflation proof pensions :(

Are you sure it is linked to CPI and not RPI? RPI was less than 1% at end of last year.

You've got a company pension that increases with CPI not RPI?

You won't mind it going up to 20% as seems likely after the next election then...

Did you write that with a straight face :-)

Actually it's not so much the handling of the current problems that's his problem but what he did previously. Their whole economic policy was based on the premise they had "abolished boom and bust", words like "what's more, Britain has broken with the previous cycles of boom and bust" was all over government documents until a couple of years ago.

The idea they could make this ridiculous claim at any time, let alone in an environment of record household debt and sustained unrealistic house price inflation was just so utterly clueless and incompetant. Even afterwards, he claimed that "Britain is better placed to deal with the economic downturn than other countries", strange how most of those other countries have now come out of recession before us and their currencies haven't taken as much of a hammering as ours.

So you've not heard about their plans to increase the pension age even further, cut tax credits, IB etc? They've actually been quite brave in admitting the amount of pain they're going to inflict on us after the election. Brown would have to do the same but hasn't got the balls to admit how they'd do it or who would suffer.

Well the Tories are likely to raise VAT by more than Labour. Labour would probably go for NI.

Indeed. But these same people were probably saying that Brown was the "best chancellor the country has ever had" when we were in a credit fuelled boom...

Lots of companies have been pulling that one...

They seem more interested in getting bank lending back to the same insane levels as pre 2007 so they can delay the inevitable pain of actually trying to reduce our addiction to debt...

Yup. Imagine if they'd got rid of Churchill because of his drinking...

That was the Weimar government's plan. And we all know what happened after that...

In message , Martin writes

Ok, I'll settle for that.

No argument with that. "Yes we can" (With permission from the Senate)

I reckon we could soon sort things out over a pint with CK and Ken Clarke while listening to jazz...

In message , brightside S9 writes

In message , Andy Pandy writes

I think I'll pa££ on that one. :-)

I used to play poker until they saw me wagging my tail.

Or just plain deceitful? But at the same time the Tories were saying that our prosperity rested on the fact that they had left Noo Labour with a sound, stable economy. Which was also based on rising debt, housing boom, de-regulation of the banks and the City, etc.

That was just a straightforward lie, unheard of previously in politics. :-)

Most of the pain is going to be felt (is being felt?) by the working population, like my kids, but only one still lives in Britain, the other two are in California and Cairns. I wouldn't like to be starting out in a relationship or housing in the next ten years. I was in fairly secure employment when we were getting married and buying a house, until the financial sector began to be more significant than industry around 1980 under Thatcher.

The worry for me is that I am 76, still active and reasonably fit, but what will be there for me when I need the NHS, or personal care?

The horror stories of care homes make me think about strapping a few fireworks round me and trying to take a few *ankers with me. ;-)

So you, too, were listening to Radio 4 this afternoon :-)