Forget the school fees – inflation’s bite is far harsher in the fridge

Blame private schools. Inflation has shown a sharp rise, so it must be down to the imposition of VAT on school fees.

Of course it is. Hang on, they account for just 7 per cent of the population. What about food and drink? Yes, those, too. Don’t forget air tickets as well, they’ve played a part.

So, there you have it – posh schools and the lucky few who can escape this seemingly never-ending winter, they’re responsible.

In explaining the latest figures showing a jump in inflation to a 10-month high of 3 per cent, Grant Fitzner, chief economist at the Office for National Statistics, said: “After falling this time last year, the cost of food and non-alcoholic drinks increased, particularly meat, bread and cereals.”

Said Fitzner: “Private school fees were another factor, as new VAT rules meant prices rose nearly 13 per cent this month.” Also: “The rise was driven by airfares not falling as much as we usually see at this time of year, partly impacted by the timing of flights over Christmas and new year.”

Fitzner clearly needs a lesson in the art of government spin and how every phrase can be, well, inflated.

Independent schools did have a role, as did air travel, undoubtedly. But they’re not the costs that most people must absorb, the ones that cause widespread pain. That’s the everyday staples; it is, as the ONS further said, milk, cheese, eggs, bread, coffee, tea, cereals and meat. Sugar, jam, chocolate and soft drinks rose as well. Food price inflation leapt from 1.9 per cent to 3.1 per cent. That’s what matters and hurts.

None of it was a shock to the Treasury and Bank of England. The latter is presented with a conundrum. Its 2 per cent rule has been breached, meaning it can, if it wishes, increase interest rates. This, just as the cost of borrowing is coming down. What the Bank will almost certainly do, is to not get carried away, stay calm and put rate reductions on hold or at least proceed more slowly.

The omens, though, are not good. Wages are going up, which will filter through to prices. Underlying core inflation, which is what is left when the most volatile prices are excluded, is rising. Businesses, faced with global uncertainty, not least because of the furious pace of change wrought by the new US administration – with the likelihood of plenty still to come – are playing safe and stockpiling. They, and we, are also having to swallow higher energy bills.

Exactly how much higher will be revealed next week, but it will not be pretty.

This has been a cold season, and gas storage levels across Europe are down, meaning energy, the bugbear of the UK economy, is in shorter supply and costs more. The official new energy price cap is likely to mean a 5 per cent increase from April. The average household will be paying £1,823 for gas and electricity as opposed to the present £1,738. To that can be added, also from April, higher water and council tax charges.

That other controller of the economic levers, the Treasury and its embattled boss Rachel Reeves, need all this like a hole in the head. The chancellor is on a growth drive, instilling confidence and with that, investment, in the UK. That’s for the future. At present, she faces a different picture of low or no negative growth (hence her push) coupled with high and rising inflation. That’s the recipe for stagflation, which Reeves will be desperate to avoid.

The Reeves plan majors on infrastructure improvements, which will take years to reach fruition. If she is serious about making the UK an attractive place in which to invest, putting it on a par with other countries, she really ought to be banging the cabinet table and demanding an urgent attack on fuel costs. Indeed, what is the point of building a new third runway at Heathrow, a Silicon Valley equivalent between Oxford and Cambridge and the rest, if the cost of doing business and living here is so punishingly high?

Britain is already paying a higher amount for its energy needs than most other European nations. The latest survey of Europe’s capital cities shows that while the residents of Budapest pay just 9.1 cents of a euro per kilowatt hour of electricity, in London it’s 36.8 cents. Only Berlin, Brussels and Copenhagen were more expensive than London. The average across EU capitals is 25.5 cents.

That, surely, should occupy the highest minds more than a few folks paying extra to educate their children.