New Year Spend

Saturday 03 January, 2015 Written by 
CPI basket

New Years is a time to make resolutions.

To save not spend but how easy will that be?

CPI stands for Consumer Price Index - a way of measuring prices. It is used by the Bank of England that controls the amount of money in circulation in order to stabilise prices. A basket of goods make up the CPI and is used to base decisions on. Once upon a time the numbers of bricks used to be counted at the UKs largest brickworks. The brickworks produced a steady stream of new bricks and measuring the number in stock would give an indication of how much house building was going on. Of course since those days, computers can crunch massive amonts of data and arrive at figures one hopes are more up to the minuet and more reliable. 

So what should we be spending for those commiitted to living more frugally and cutting debts and saving. This is what the average member of society spends:

 

Item    

% of average spend

Food & Non-alcoholic beverages                      

10.6%

Alcohol   & Tobacco                                              

4.4% 

Clothing   & Footwear                                         

6.8%

Housing   & household services                         

13.7%

Furniture   & household goods                            

5.9% 

Health

2.5%

Transport      

14.9%

Communication

3.1%

Recreation   & culture                                       

14.1%

Education    

2.1%

Restaurants  hotels

11.0%

Miscellaneous   goods &   services                      

10.3%

The CPI is an important target as the Bank of England has an explicit inflation target of 2 per cent to stick too. According to bestselling author, John Lanchester, the Joseph Rowntree Foundation has published these figures for the last five years. Childcare has risen twice as fast as inflation at 37 per cent. Rent and social housing has gone up by 26 per cent. Food costs have increased by 24 per cent. Energy costs are 39 per cent more, and public transport is up by 30 per cent.  

No wonder those on low incomes are suffering. It is understandable that those on low incomes need state help (Tax Credits,or Housing Benefit) and why those in the private sector are driving up prices far above (it would appear) the official CPI inflation figures. 

We are a benefit dependant society, not because of a culture of laziness but because wages and their purchasing power has fallen since the 70s. The government in recent years has been driving down the value of benefits to make work pay, when in reality rising wages are what is needed.  If wages rise however, firms become less profitable and the owners and shareholders and managers (whose pay is linked to profitability) stand to lose out. The alternative is getting those in work to subsidise their own jobs and those of their fellow workers by providing funding [via tax] that subsidises those on low incomes.

 

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