Royal Mail Inadvertently Gave The Inflation Game Away
According to the UK Office for National Statistics, inflation in the United Kingdom is currently between 4% and 4.9%, depending on which index you use (RPI, CPI, or CPIH).
That's the official government figure, and anyone with half a brain knows it's at best over-optimistic, and at worst a complete fantasy.
Image by Mark Hultgren from Pixabay
Why Is The Official Figure So Different To Our Real Experience ?
Part of the issue is that the start-point date was still at the tail end of the pandemic, and all inflation figures during the pandemic were estimates - the government claimed it was too difficult to get accurate figures, and that the pandemic would have distorted the numbers anyway.
Another factor to consider is that the "basket" of products and services used in the various indices is carefully curated. Notionally to provide a fair and balanced figure based on changing purchasing habits (e.g. there is little point in including cassette tapes any more). But it's curious how some high-inflation products are left out, and low-inflation ones are added in.
The reality is that everyone has a different "personal inflation" figure, depending entirely on their lifestyle, what kind of transport they use, how they heat their home, where they live, whether they are renting, buying with a mortgage or (more often for the older people) have paid off their mortgage and own their house outright.
Post Prices As Inflation
However, one of the "standard" things people use as an unofficial measure of inflation is the price of a First Class Stamp.
It's that time again where Royal Mail announce their latest prices. This used to be a once-a-year annual increase, timed for the end of the tax year at the end of March. Sadly, they've joined the ranks of evil corporations determined to obfuscate their policies and prices.
For ordinary consumers, they've started doing two annual increases, in October and March. For business customers, we seem to get about 6 increases a year, all of them with raised international prices and each having increases on a few additional services as well. Most services thus end up with about 3 increases per year.
I guess it's all about making the jump between prices less of a shock. A twist is that some services are covered by OfCom's Universal Service Obligation, which imposes caps on price increases for the public, while most business services are outside those regulations.
It's also notable that increases are always set to happen on a Monday, which means that for an online e-commerce business, anything sold over the weekend will be at the new prices.
So What Are The Actual Numbers ?
At the start of the tax year, a First Class stamp cost £0.95. This was increased on 4th April to £1.10, and to £1.25 in October 2023. The new price from 2nd April 2024 will be £1.35.
Business prices are a convoluted mess of multiple services, each with a base price and layered Fuel Surcharge, Green Surcharge and (from October to January) Peak Surcharge. Plus VAT on top for most services. But the overall level of increase is similar to or slightly above the consumer rates, just far harder to calculate.
The main difference is the continued push to move business customers away from Large Letter and Parcel formats onto Tracked format, mainly done by social engineering of prices to make the Tracked services look more appealing.
So although each increase in a First Class stamp is only 10-15p each time, the difference between 4th April 2023 and 2nd April 2024 is £0.25, an increase of 22.7%.
That's a bit different to the official UK inflation figure !
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Thank you for this clear and concise post on using something evergreen to work out inflation. For me it typically used to be a std meal at a normal restaurant but using a service like Royal Mail's business valuation does seem like a better plan. I need to find something similar in India now.
Thanks for your reply ! The price of a stamp works in the UK as a measure of inflation because people can relate to it. There might be something in India that most people buy and where changes in price can easily be related to people's real circumstances. Maybe rice or bread or something.
Internationally, there has long been a "Big Mac Index" (The Economist magazine claims to have launched the idea back in 1986) which is a way to compare the purchasing power of various currencies.
Yes a friend of mine told me that thumbrule of mac in 2003 when I first visited UK. I was a young engineer and my wife and I were so confused on how to work out the costs in UK especially for eating outside. Everything looked so exorbitant when we calculated it our buying power in INR (At that time I think might have 70inr to a pound) This thumbrule of caluclating the base as a macd burger saved my mental health :D