Chart of the Day: Inflation falls

CPI and RPI both drop by 0.2 points

Thanks largely to lower water, gas and electricity bills, inflation in the UK continued to fall in February, according to new figures released by the Office for National Statistics (ONS).

The consumer price index (CPI) - a measure used to gauge inflation rates across the European Union - dipped in the UK to 3.4 per cent last month, a decrease from 3.6 per cent in January. The Bank of England's target for inflation is 2 per cent on the CPI measure.

A large upward effect came from food and non-alcoholic beverages, clothing and footwear, furniture and household equipment.

The CPI stands at 121.8 in February 2012 (based on 2005=100).

The retail price index in the UK was 3.7 per cent in February, a decrease of 3.9 per cent. This was mainly due to downward pressures from fuel and light and motoring expenditure, while upward pressure came from alcoholic drinks.

The all-goods index is 189.9 in February, up from 186.7 the previous month. The RPI stood at 239.9 in February (based on January 1987=100).

David Page, an economist at Lloyds told the Financial Times:

We are no longer especially confident that inflation will slow back to, never mind below, the Bank of England Monetary Policy Committee’s 2 per cent target over the medium term.

Sylvia Waycot of the financial information service Moneyfacts told the BBC:

It's just a bit too early for everyone to burst into a chorus of 'Don't worry, be happy', as today's figures still mean that there are only 79 accounts out of 1,126 that negate both inflation and the taxman’s cut.

 

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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.