Tuesday, 14 June 2011

Inflation: We're Not All In This Together

An interesting report from the Institute for Fiscal Studies highlights the fact that there isn't a single rate of inflation which applies to all of us.

With rocketing fuel and food costs, and the inflation rate way above the government's target and no sign of falling, the truth is that the poorer you are, the higher your real inflation rate is.

This is because pensioners and less well-off families typically spend a greater share of their income on food and fuel. So with inflation around 5% and rising, and fuel prices rising at 10% - 19%, the real cost of inflation for this group is nearer 8%. Add that to the VAT rise, cuts to tax credits, cuts to childcare support and the child benefit freeze, and many low paid families are really hurting.

The inflation rate for better off families is actually less than 4%.

Yet when will the coalition government act on this? Is this because they aren't feeling the pinch?

Rachel Eden has another angle on the issue.

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