THE fall in inflation was generally viewed as a sign that prices are being kept in check, if not to their targeted level.
How much this is because of action by the Bank of England is debateable, given that the data is at the mercy of such things as swings in commodity prices.
Above target inflation combined with low interest rates is also killing the value of savings. A survey published yesterday showed that the number of inflation-beating savings accounts on the market has shrunk from 227 a year ago to just one today.
Savings have also been damaged by the coalition government’s Funding for Lending Scheme, which has given lenders access to cheap finance in order to help borrowers. While it has stimulated the moribund mortgage market, witnessed by house prices rising at their fastest since 2006, it has made providers less reliant on having to offer attractive savings accounts to pull in savers’ money.
Low interest rates may encourage consumers to spend, giving a boost to the high street, and therefore the wider economy, but they do nothing for investments that erode in value if inflation is higher.
One industry specialist says these are “dark days” for savers. It is also a difficult time for the savings industry which is attempting to persuade us all to put more of our money aside for those rainy days.
Rail passengers stung again with price rises
The latest inflation figure is also testing the resolve of rail travellers as it will mean yet another rise in ticket prices in the new year.
This has turned into an Anglo-Scottish debate as passengers in Scotland face a 3.1 per cent rise – in line with the RPI rate of inflation – while in England the increase will be an average of 4.1 per cent. Off-peak ticket prices will be frozen in Scotland.
There was some embarrassment for the coalition’s Transport Secretary Patrick McLoughlin, who was asked by the BBC why he was not following Scotland’s example. He claimed it was because of low investment in Scotland’s railways, despite the fact that £5 billion is being poured into the network.
But none of this north-south stuff matters too much if your journey is cross Border or you need to travel in England.
The debate south of the Border is over outdated pricing structures that do not take into account modern lifestyles and ways of working. The Institute of Directors is calling for change, such as off-peak season tickets.
The IoD says many employers would be happy for staff to arrive at work after 10am, which would dramatically reduce the cost of a season ticket.
Notwithstanding the differences between the Scots and English price increases, rail tickets are becoming prohibitively expensive for all.
Exports on the rise, but not all is as it seems
Exports from Scotland are on the rise, adding to the general sense that the economy is in recovery mode.
But the figures from Ernst & Young come with a couple of caveats. Yes, Scotland is expected to outpace the rest of the UK, but only because some regions are forecast to underperform. Scottish exports may be heading in the right direction but they will lag behind four other UK regions.
There is also a weight of expectation on the Commonwealth Games next year to deliver the required fillip.