This figure is, of course, and people are finally waking up to the fact, total bollocks.
The price of virtually everything that matters is going up by way more than that. Even the base price of that most basic and fundamental of commodities, money, has risen from 4.5%pa to 5.25%pa in a year - an increase of 17%
The Office of National Statistics has put up an interesting, if somewhat clunky, personal inflation calculator here.
I've just plugged in some figures for my own household and came up with an inflation figure of 8%. If you stick in figures for a typical pensioner the result is something like 9 - 10%.
This apparent mismatch between the official inflation rate and the inflation experienced by many real people boils down to the fact that the price of essential goods and services - water, power, local taxes, public transport ... money - are rising like stink, whilst the prices of consumer goods and services provided by slave labour, overseas and domestic, are falling.
Consequently, the more you spend on consumerist shit the lower your average rate of inflation and the official inflation figures are rigged that way. For the majority of us who can't or won't spank cash on tat the average rate of real inflation is much higher - unless your staple diet is illegal immigrants and you heat your home by burning Chinese-made DVD players.
I'm currently trying to sort out the finances of a retired family member. She receives something like a 5% gross return on her savings. Her personal inflation rate is something like 8 -10%. Which means that even if she saved all of her interest and ate grass the real value of her savings would still fall by 3 - 5% a year. If she took the income her spending power would fall by 8 - 10% a year.
In short, somebody is thieving from her - and every other person on a fixed income or earning a wage that doesn't rise by 8 -10% a year.
Which is quite a few people. The majority of people in fact.
That of course doesn't stop governments and employers behaving as if people's wages are the primary cause of inflation and doing their level best to keep the rate of wage inflation below real inflation rates - just about the neatest way to rob millions of people blind anyone has ever come up with.
Of course, if my relative could pretend she had more money than she really had, lend out ten times the value of her savings and charge 5% interest on that she'd be earning a 50% turn on her cash. More than enough to keep place with the real rate of inflation, take an income and have quite a bit left over. She could then, of course, lend ten times anything she had left over in each succeeding year. After 10 years of this nonsense a £10,000 starting stake would be worth £410,000 of real money, £4,100,000 of made-up money and delivering a gross income of £205,000 a year...
The only problem with this plan is that it is, of course, fraud. For a private individual anyway. For a bank, on the other hand, this is good business and a cornerstone of capitalism. Well, what passes for capitalism these days.
And that, as they say, is why the biggest and most expensive buildings in most cities belong to banks.
And that is where all those big bankers' bonuses come from
And that is why I piss myself laughing, and I'm guessing bank directors and owners piss themselves laughing, whenever there's a consumers' rights campaign about bank account fees, cheque clearing times, people being charged 50 pence to use a cash machine and itty bitty distractive shit like that. Oooh, I bet those fat cats are quaking in their boots...