Other uses of the index ['I'm a person who doesn't send their kids to private school; how much is my wage increase offer more than my cost of living?'] will need a different index [in this case CPI excluding school fees]. The CPI is a compromise in that respect for all of these uses. - ThreadSky

t0nyyates.bsky.social • 4 days ago

Other uses of the index ['I'm a person who doesn't send their kids to private school; how much is my wage increase offer more than my cost of living?'] will need a different index [in this case CPI excluding school fees]. The CPI is a compromise in that respect for all of these uses.

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ppudney.bsky.social•4 days ago

This choice to include school fees does have policy and political implications, its not just economics . Controlling school fees e.g. interest rates/benefits when its only top 1% paying, when could be more about core (e.g. Food). Choosing school fees to be in basket is political as much as economic

t0nyyates.bsky.social•4 days ago

The important political/policy q's are whether private schooling is allowed, its tax treatment, curriculum and hiring regulations. Also given you mention food, whether low income people receive adequate benefits. These are addressed by addressing them directly not by the choice of price index.

t0nyyates.bsky.social•4 days ago

CPI gets used for wage negotiations; for indexing tax and benefit thresholds [when indexing is not consciously avoided, that is]; for indexing govt bonds. Whether the indexing is good or bad will depend on individuals baskets. In aggregate the CPI will not be too bad an approximation.

t0nyyates.bsky.social•4 days ago

Indexing benefits using an index that includes stuff rich people buy, like private schools, will obviously not protect against benefit recipients' cost of living; but then these decisions are normally not automatic index-triggered and are political anyway.

gavinjackson.bsky.social•4 days ago

And I would caution people not to assume a different index would give a more favourable answer. Food prices were also up by more than expected and they have a greater weight in poorer people's consumption.

The use of RPI in indexing also shows that statistical accuracy is not the concern.

gavinjackson.bsky.social•4 days ago

The final point I will make is that the way we talk of causation for inflation is a bit misleading. Saying that inflation went up _because_ of private schools is wrong. Inflation is what it is because _every_ component of the basket moved in the way it did. In different circumstances the schools...

gavinjackson.bsky.social•4 days ago

...might have absorbed the VAT increase and not passed it along to their clients but they felt they could get away with it because of the level of demand for their product and so on.

grantlewis.bsky.social•4 days ago

And many private schools used it as an opportunity to stealthily raise fees by passing on the gross 20% rather than the net VAT increase on the school

t0nyyates.bsky.social•4 days ago

Oh yes - inflation is everywhere and always an individual price phenomenon discourse is very annoying!

pdonovan-econ.bsky.social•4 days ago

Also worth noting that despite the handwringing in some quarters of the media, the weighting of education increased in January. Some of this is the higher proportion of a family budget as a result of pricing, but it undermines the idea of private school children switching to state schools en masse

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