Inflation rises by half a per cent

CPI now stands at 2.7 per cent.

The ONS has released the inflation report for this month. It's up. A lot:

The Consumer Prices Index (CPI) annual inflation stands at 2.7 per cent in October 2012, up from 2.2 per cent in September. The main upward pressure came from the education sector (university tuition fees) with smaller upward contributions from food & non-alcoholic beverages and transport. These were partially offset by downward pressures from the housing & household services, recreation and miscellaneous goods & services sectors.

The Retail Prices Index (RPI) annual inflation stands at 3.2 per cent in October 2012, up from 2.6 per cent in September.

That's the highest since May for the CPI, and 0.4 points higher than the consensus estimate (which was for 2.3 per cent for RPI and CPI). The fact that the main upward pressure came from tuition fees means that this rise is almost entirely due to the government's own decisions – and also that it is all-but-guaranteed to fall by an equivalent amount in a years time.

The extent of the effect of rising tuition fees is clear in this chart, which breaks down the various contributions of different spending categories on inflation:

This is a crisis of a sort: It is also important to point out that this now leaves inflation again racing ahead of wage growth, by a full percentage point (wage inflation stood at 1.7 per cent in the last estimate); and the idea of a "misery index" - compounding the effects of inflation and unemployment together to see the pain the economic climate inflicts on the typical person - indicates that this rise will wipe out recent goodwill gained from the falling unemployment rate. But it is not a macroeconomic crisis; without the government's short-sighted actions in 2010, this rise would be just 0.1 per cent, easily enough to argue that low inflation is here to stay. We'll see next month what happens to the overall trend.

Andrew Goodwin, senior economic advisor to the Ernst & Young ITEM Club, comments:

This is a very nasty surprise. We had expected inflation to pick up in October because of the rise in tuition fees and food prices, but the scale of the increase was surprisingly large. 

Further out we are still confident that inflation will slow back towards the target. And because of the causes of the October increase, it could be argued that these figures aren’t quite as bad for household finances as they may first appear. They represent a significant squeeze for those affected directly by the tuition fee increase, however the vast majority of people will not have been impacted. 

Finally, it is worth pointing out that the inflation target is a symmetrical one. The Bank of England's mandate is to bring inflation to 2 per cent, and it must write a letter to the chancellor explaining why it has failed if it is more than one point away in either direction. If inflation does stay below three per cent, then it remains not much to worry about.

Updated 9:53 and 11:29 with further analysis.

 

A student walks through St John's, Cambridge. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

GARY WATERS
Show Hide image

In defence of expertise: it’s time to take the heart out of “passionate” politics

What we need is cool logic.

We are living through a bonfire of the experts. During the EU referendum campaign, Michael Gove explained that people had had enough of them. A few weeks later, his fellow Tory MPs took him at his word and chose a relative ingénue to run against Theresa May.

After declaring for Andrea Leadsom in the Tory leadership race, Michael Howard was asked whether it might be a problem that she had never held a position higher than junior minister. Howard, whose long career includes stints as home secretary and opposition leader, demurred: “I don’t think experience is hugely important.”

Even in this jaw-dropping season, that comment caused significant mandibular dislocation. I thought: the next Tory leader will become prime minister at a time of national crisis, faced with some of the UK’s most complex problems since the Second World War. If experience doesn’t matter now, it never does. What does that imply about the job?

Leadsom’s supporters contended that her 25 years in the City were just as valuable as years spent at Westminster. Let’s leave aside the disputed question of whether Leadsom was ever a senior decision-maker (rather than a glorified marketing manager) and ask if success in one field makes it more likely that a person will succeed in another.

Consider Ben Carson, who, despite never having held elected office, contested the Republican presidential nomination. He declared that Obamacare was the worst thing to happen to the United States since slavery and that Hitler may have been stopped if the German public had been armed. Yet Carson is not stupid. He is an admired neurosurgeon who pioneered a method of separating conjoined twins.

Carson is a lesson in the first rule of expertise: it does not transfer from one field to another. This is why, outside their domain, the most brilliant people can be complete dolts. Nevertheless, we – and they – often assume otherwise. People are all too ready to believe that successful generals or entrepreneurs will be good at governing, even though, more often than not, they turn out to be painfully inept.

The psychologist Ellen Langer had her subjects play a betting game. Cards were drawn at random and the players had to bet on whose card was higher. Each played against a well-dressed, self-assured “dapper” and a shabby, awkward “schnook”. The participants knew that it was a game of chance but they took more risks against the schnook. High confidence in one area (“I’m more socially adept than the schnook”) irrationally spilled over into another (“I’ll draw better cards”).

The experiment points us to another reason why we make poor judgements about competence. We place too much faith in social cues – in what we can see. As voters, we assume that because someone is good at giving a speech or taking part in a debate, they will be good at governing. But public performance is an unreliable indicator of how they would cope with running meetings, reading policy briefs and taking decisions in private. Call it the Boris principle.

This overrating of the visible extends beyond politics. Decades of evidence show that the job interview is a poor predictor of how someone will do in the job. Organisations make better decisions when they rely on objective data such as qualifications, track record and test scores. Interviewers are often swayed by qualities that can be performed.

MPs on the Commons education select committee rejected Amanda Spielman, the government’s choice for the next head of Ofsted, after her appearance before them. The committee didn’t reject her because she was deficient in accomplishments or her grasp of education policy, but because she lacked “passion”. Her answers to the committee were thoughtful and evidence-based. Yet a Labour MP told her she wasn’t sufficiently “evangelical” about school improvement; a Tory asked her to stop using the word “data” so often. Apparently, there is little point in being an expert if you cannot emote.

England’s football team is perennially berated in the media for not being passionate enough. But what it lacks is technique. Shortly before Wales played England in the European Championship, the Welsh striker Gareth Bale suggested that England’s players lacked passion. He knew exactly what he was doing. In the tunnel before kick-off, TV cameras caught the English goalkeeper Joe Hart in a vessel-busting frenzy. On the pitch, Hart allowed Bale to score from an absurdly long range because he was incapable of thinking straight.

I wish there were less passion in politics and more cool logic; less evangelism and more data. Unthinking passion has brought the Labour Party to its knees and threatens to do the same to the country. I find myself hungering for dry analyses and thirsting for bloodless lucidity. I admire, more than ever, those with obscure technical knowledge and the hard-won skills needed to make progress, rather than merely promise it.

Political leadership is not brain surgery but it is a rich and deep domain. An effective political leader needs to be an expert in policy, diplomacy, legislative process and how not to screw up an interview. That is why it’s so hard to do the job well when you have spent most of your time in boardrooms or at anti-war rallies.

If democratic politicians display contempt for expertise, including their own, they can hardly complain if those they aspire to govern decide to do without the lot of them. 

Ian Leslie is a writer, author of CURIOUS: The Desire to Know and Why Your Future Depends On It, and writer/presenter of BBC R4's Before They Were Famous.

This article first appeared in the 21 July 2016 issue of the New Statesman, The English Revolt