Trebling of tuition fees has stoked inflation

More pressure put on household budgets after students' bills rocket

The controversial trebling of student tuition fees, pushed through by the coalition amid bitter protests two years ago, is set to add to the Bank of England's headaches by fuelling a fresh rise in inflation this week.

The Bank's official Consumer Prices Index inflation benchmark is set to jump to 2.5 per cent for October from a three-year low of 2.2 per cent in September. This will put more pressure on household budgets as the economy struggles to retain momentum during the final quarter of 2012.

Analysts warn a major factor in the latest rise is the near-trebling of average tuition costs to £8,385 for the current academic year. The policy was agreed in November 2010 after Liberal Democrat leader Nick Clegg broke a pre-election pledge not to raise tuition fees and lifted the cap to £9,000.

Under the final year of the old regime, average tuition fees were £3,375, according to the Office for Fair Access.

The chief economist at Investec, Philip Shaw, said the price rise would have a lingering impact on the inflation figures as three successive years of new students pay the higher fees. He said: "This is likely to add 0.2 or 0.3 per cent to inflation, an effect set to be present in the data for three years. This isn't something which will disappear next October."

Education, which also includes private school fees and adult education classes, only accounts for around 2 per cent of the overall CPI inflation basket, although the huge rise is likely to have a disproportionate effect. The last time a major rise in fees took place under Tony Blair, when costs rose from an average of £1,175 to a maximum of £3,000 in October 2006, the increase added 0.12 percentage points to the CPI.

The Bank of England called a halt to its quantitative easing money-printing programme last week, a decision driven in part at least by the worsening prospects for inflation.

Mr Shaw added: "Our forecasts point to higher grain prices and a resumption of gas and electricity tariff increases dragging inflation further away from the target. We consider that CPI inflation could be as high as 3.5 per cent by mid-2013."

The Bank is set to raise its inflation estimates in its latest set of quarterly forecasts next week to reflect the renewed pressure on the cost of living.

The Bank's Monetary Policy Committee is also set to trim back prospects for growth next year, estimated at 1.8 per cent in August, to reflect more modest City forecasts of 1.1 per cent, according to Deutsche Bank chief economist George Buckley.

He said: "The Bank has an optimistic-looking profile and we're expecting downward revisions."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Adviser - OTE £24,500

£22500 - £24500 per annum: Recruitment Genius: Inbound and outbound calls with...

Recruitment Genius: Business Development Executive / Sales - OTE £40,000

£18000 - £40000 per annum: Recruitment Genius: This fast growing Insurance Bro...

Guru Careers: Research Associate / Asset Management Research Analyst

£40 - 45k (DOE) + Benefits: Guru Careers: A Research Associate / Research Anal...

The Green Recruitment Company: Graduate Energy Analyst

£20000 Per Annum: The Green Recruitment Company: Summary: The Green Recruitm...

Day In a Page

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkey's conflict with Kurdish guerrillas in Iraq can benefit Isis in Syria

Turkish President Erdogan could benefit politically from the targeting of the PKK, says Patrick Cockburn
Yvette Cooper: Our choice is years of Tory rule under Jeremy Corbyn or a return to a Labour government

Our choice is years of Tory rule under Corbyn or a return to a Labour government

Yvette Cooper urged Labour members to 'get serious' about the next general election rather than become 'a protest movement'
Singapore's domestic workers routinely exploited and often abused in the service of rich nationals

Singapore's hidden secret of domestic worker abuse

David Cameron was shown the country's shiniest veneer on his tour. What he didn't see was the army of foreign women who are routinely exploited and often abused in the service of rich nationals
Showdown by Shirley Jackson: A previously unpublished short story from the queen of American Gothic

Showdown, by Shirley Jackson

A previously unpublished short story from the queen of American Gothic
10 best DSLRs

Be sharp! 10 best DSLRs

Up your photography game with a versatile, powerful machine
Solved after 200 years: the mysterious deaths of 3,000 soldiers from Napoleon's army

Solved after 200 years

The mysterious deaths of 3,000 soldiers from Napoleon's army
Every regional power has betrayed the Kurds so Turkish bombing is no surprise

Robert Fisk on the Turkey conflict

Every regional power has betrayed the Kurds so Turkish bombing is no surprise
Investigation into wreck of unidentified submarine found off the coast of Sweden

Sunken sub

Investigation underway into wreck of an unidentified submarine found off the coast of Sweden
Instagram and Facebook have 'totally changed' the way people buy clothes

Age of the selfie

Instagram and Facebook have 'totally changed' the way people buy clothes
Not so square: How BBC's Bloomsbury saga is sexing up the period drama

Not so square

How Virginia Woolf saga is sexing up the BBC period drama
Rio Olympics 2016: The seven teenagers still carrying a torch for our Games hopes

Still carrying the torch

The seven teenagers given our Olympic hopes
The West likes to think that 'civilisation' will defeat Isis, but history suggests otherwise

The West likes to think that 'civilisation' will defeat Isis...

...but history suggests otherwise
The bald truth: How one author's thinning hair made him a Wayne Rooney sympathiser

The bald truth

How thinning hair made me a Wayne Rooney sympathiser
Froome wins second Tour de France after triumphant ride into Paris with Team Sky

Tour de France 2015

Froome rides into Paris to win historic second Tour
Fifteen years ago, Concorde crashed, and a dream died. Today, the desire to travel faster than the speed of sound is growing once again

A new beginning for supersonic flight?

Concorde's successors are in the works 15 years on from the Paris crash