The Oil Drum: Europe

Aaaah, "lies, damn lies and statistics". The "new" way of calculating inflation is by comparing apples and oranges, known as "sample substitution", or something like that. An example: if the price of a shirt is moving too high at a name brand store the government substitutes it for a cheaper one from WalMart. That is old hat already - but it gets more insiduous: if olive oil, for example, gets too expensive vs. canola oil....statistics says you will alter your eating habits.

Et Voila... 2%.

The best case scenario was if you lived at home and scrounged off your parents, in this case you may actually experience deflation (thanks to all those cheap ipods...)

The worst was if you were a pensioner, due to the very real cost of fuel costs rising.

Me?   I'm being hammered by huge increases in housing costs (relative to older folk that purchased a decade ago) especially compared to my income.  Rents around here are rising faster than the rate of inflation....
Of course Brown changed which measure of inflation he uses, to the one where housing costs are not considered.  This was to prevent house price increases from causing runaway inflation, and to prevent public sector workers from demanding payrises to pay for more expensive housing.  This (along with a multitude of other reasons) is why I'm far from impressed with our so-called "prudent" Chancellor.

I don't believe the 2% inflation figure for one second.

Plus, I have to comment on fuel duty.  Although the real cost of motoring has decreased, that's mainly due to cheap credit and cheaper cars.
The cost of FUEL has increased above the rate of inflation.  I don't see how it is fair that the Chancellor can increase his tax take on fuel pushing the total cost up beyond inflation.

Plus no one ever mentions that there is a component of tax on fuel that increases with inflation.  VAT.

In late 2003, I could buy petrol for 77p/litre.  VAT accounted for 13.475p

Now in 2006 petrol is 85p/litre.  VAT accounts for 14.875p

That's a 10% rise on VAT receipts.  In a period where inflation has supposedly been 6%  So the Chancellor has already had his inflation busting increase in VAT receipts from fuel.

The price of fuel, as mentioned, has already gone up beyond inflation.  The excuse that the treasury receives less total cash (adjusted for inflation) because there has not been inflation increases on (fixed) fuel duty just will not wash with the public.  Especially considering the vast increases of Stamp Duty receipts, North Sea revenues and VAT recipes on home fuel (5% of a 30% rise in consumer costs).

Nope, Gordon has massively increased tax take, and we've got little to nothing to show for it.  Especially as most of our new schools/hospitals are now PFI, which is the government equivalent of buying it on a credit card and only paying the interest charges.  

Not impressed

Andy

My personal feeling is that the affluence has gone way up with the arrival of the €. In the 1980s people started to afford a house, in the 1990s it was the private car and multi-car family. Lately it has been vacations in the Caribbean or Brasil and for some lucky ones Seychelles or maybe Mauritius.

We live incomparably better than 20 years ago. So those inflation numbers are not much of an indication of what's going on. Since we have high tolls on gas we haven't felt that much the gas prices, although last Summer they were almost 50% above early 2004.

I do feel the hike on manual labour services like you say, mechanics (my bike mechanic earns more than I), restaurants, house keeping, etc, mainly due to lack of supply of such workers. But these hikes have been offset by the growing affluence brought be the €. In 10 years the minimum monthly wage in $ almost doubled (from circa 270 $ to above 530 $).

The real big concern here is that people went like crazy into debt, which went over 100% of house income 3 or 4 years ago. Today even families with annual income above 35000 € are flocking into protection in face of Trichet's rate hikes. So basically debt crunched families are feeling great pain in a time like no other here. My parents could only dream of the life middle class families now have.

True.  Or you can shop at the upmarket stores, and pick up "trash" way high! :-)

RC  known to you as ThatsItImout