Belfast Telegraph

University fees holding down rate of inflation

By Clare Weir

Northern Ireland could be partially cushioned from a shock jump in the UK's annual inflation rate because of lower university fees, experts have predicted.

The bigger than expected leap in the Consumer Prices Index (CPI) to 2.7% came just a month after inflation fell back to a near three-year low of 2.2% in September.

A near trebling in British university tuition fees and a hike in food prices were blamed for the increase, which was the biggest month-on-month jump in a year.

The Office for National Statistics (ONS) said the biggest factor pushing up CPI was the Government's widely protested move to lift the tuition fees cap to £9,000 from £3,375 a year ago, which saw education costs rise by 19.1% last month - the largest increase since records began.

Northern Bank chief economist Angela McGowan said that, on average, prices continue to climb but households with student fees to pay will be feeling the strain more than most.

"Between September and October 2012, UK education prices rose 19.1% compared to a rise of only 2.7% in the same two months last year," she said.

"The maximum undergraduate fee in the UK is £9,000 but as fees in Northern Ireland are capped at a rate which is almost two thirds less than this, the local economy should be feeling less pressure from this latest rise in the headline inflation figure.

"In the months ahead, it is expected that inflation levels will feel the strain from rising energy costs. However, that upward pressure could be offset by weak demand should economic growth in the UK lose momentum."

Dr Esmond Birnie, chief economist for PricewaterhouseCooper in Northern Ireland, said that the increase reflects the impact of some temporary factors such as planned utility price increases - mainly in GB - the impact of global commodity food price rises earlier in the year and that stellar hike in university tuition fees.

"Not all of these factors will impact directly on Northern Ireland and some may impact to a lesser degree in other regions," he said.

"The continued weakness of UK economic activity may bring inflation down over time and it is worth remembering that, despite October's disappointing increase, inflation is still close to half the peak of a year ago," said Dr Birnie.

Sharp increases in the cost of food were also behind the rise after this summer's record wet weather left the UK with its worst potato and carrot harvest in living memory, the ONS said.

19.1%

Between Sept and Oct 2012 UK education prices rose by this amount

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