Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point

In Depth

On Air

Low Graphics

Friday, July 16, 1999 Published at 13:35 GMT 14:35 UK

Business: The Economy

We're richer than we thought

There could be more money in your pocket than you realised

People in the UK might be better off than they think, according to a report from the Institute of Fiscal Studies.

It claims that the official measure for inflation has overstated the true cost of living in the past two decades.

BBC Economics Correspondent Chris Giles: Not good news for pensioners and unions
This would mean that pensions and many wage settlements linked to the rate of inflation have more than kept up with price changes.

Basket of goods

Inflation is calculated by tracking the prices of a so-called basket of goods over a period of time.

But the IFS, an independent think tank, believes consumers tend to change the goods they buy.

This, along with the emergence of new goods and the improved quality of existing products, could have led to the overstatement.

The report took the example of the national Lottery, which was launched nearly five years ago and now accounts for 1% of consumer expenditure.

It estimated that by including the lottery, the inflation figure excluding housing for the year to December 1994 would have fallen by at least 0.17% to 1.97%.

Audio-visual goods 60% cheaper

The study also argues that while the price of audio-visual equipment has fallen by about 20%, the quality has improved hugely.

That means that true price fell by at least 60% between 1974 and 1996, but the inflation index did not recognise this.

If this report were accepted, it could have dramatic consequences for the government, as it would not have to pay out so much in inflation-linked spending.

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Economy Contents

Relevant Stories

15 Jun 99 | The Economy
UK inflation hits new low

23 Mar 99 | The Economy
UK inflation beats the target

In this section

Inquiry into energy provider loyalty

Brown considers IMF job

Chinese imports boost US trade gap

No longer Liffe as we know it

The growing threat of internet fraud

House passes US budget

Online share dealing triples

Rate fears as sales soar

Brown's bulging war-chest

Oil reaches nine-year high

UK unemployment falls again

Trade talks deadlocked

US inflation still subdued

Insolvent firms to get breathing space

Bank considered bigger rate rise

UK pay rising 'too fast'

Utilities face tough regulation

CBI's new chief named

US stocks hit highs after rate rise

US Fed raises rates

UK inflation creeps up

Row over the national shopping basket

Military airspace to be cut

TUC warns against following US

World growth accelerates

Union merger put in doubt

Japan's tentative economic recovery

EU fraud costs millions

CBI choice 'could wreck industrial relations'

WTO hails China deal

US business eyes Chinese market

Red tape task force

Websites and widgets

Guru predicts web surge

Malaysia's economy: The Sinatra Principle

Shell secures Iranian oil deal

Irish boom draws the Welsh

China deal to boost economy

US dream scenario continues

Japan's billion dollar spending spree