IT’S one of the conundrums of new Labour: why in this “historic” era of low inflation are prices rising so quickly? Now the government’s own figures suggest it might be because Gordon Brown’s typical “shopping basket” used to assess the cost of living is chock-full of bargain items.

While passport fees have risen 57% in less than a year, energy prices have risen by more than 25% and the cost of some luxury items has spiralled, most consumers are baffled by the government’s insistence that inflation is still only 2.5%.

The chancellor commonly cites low inflation as among new Labour’s greatest achievements. However, data compiled by the Office for National Statistics (ONS) suggest that the government’s typical shopping basket, used to assess inflation, has been piled high with cheap goods while other expensive items and services are bought more sparingly.

The data show that “recreational goods”, including CD players and televisions, account for more than 9% of household spending in the government’s typical shopping basket of household expenditure while school and university fees account for less than 2%.

The costs of public transport are said to be only about 3% of expenditure and the cost of a mortgage and council tax bills are not even included.

For consumers who rent their home, have a staple diet of cheap processed food and who shop primarily for clothes and cheap electrical goods at weekends, Brown’s basket, known as the Consumer Price Index (CPI), is said to be fairly accurate. Even rising fuel prices for these families are unlikely to outweigh the savings made as a result of the dramatic fall in shop prices in recent years.

But families who spend significant amounts of money on education or health services, or who have a long commute to work by train or who spend money on gym fees or tickets to the theatre, are likely to experience “personal inflation” at significantly higher levels than the official rate of 2.5%.

Jon Schryer, 48, an insurance broker from London who commutes to Manchester for work, said: “Most things have gone up noticeably in price — such as transport, fuel, healthcare and education — even though the government says that inflation is only 2% or 3%.

“I don’t travel by train any more unless I have to, because the prices are now ludicrous. It costs £200 a day to commute to Manchester by train.”

It is not just transport costs and education fees that have risen dramatically. Over the past two decades the cost of entertainment such as trips to the theatre and “personal services” such as a visit to the hairdresser have more than tripled.

Over the same period the cost of electrical goods has fallen by about 25% and the costs of new clothes has fallen by about 8%.

Processed foods such as biscuits and cakes have increased only by about 65% while the cost of a meal out at a restaurant has more than doubled.

Critics of the CPI argue that it gives undue weight to items which have fallen significantly in value such as electrical goods and clothes.

One economic commentator last week cuttingly referred to the CPI as the “Chav Price Index” and said it did not reflect the true inflation level experienced by many people.

The cost of most fees and services since Tony Blair came to power has risen significantly. The cost of private education rose by more than 50% between 1997 and 2005 while the average cost of hiring a full-time nanny rose from £16,000 to £29,000.

Andrew Oswald, professor of economics at Warwick University, said he believed the government did a good job in reflecting the expenditure of the average Briton but more affluent people could experience higher levels of inflation. He said people were paying higher prices for “top quality goods” and services.

Analysts say the CPI is consistently lower than it should be because it does not include property purchases and council tax. Brown has urged employers to use this inflation measure when working out staff wages, which means salaries are unlikely to keep pace with the cost of running a home.

A spokesman for the ONS strongly denied it was producing a “chav index” and said the shopping basket of 650 goods and services was carefully compiled to reflect the spending habits of a typical Briton.

He said: “It is just not possible to obtain an average figure which is going to fit every person. It would be good to have a personal price index in which people could input their expenditure to obtain a rate of inflation but it would be very complicated.”

Explore UK News

• Crime News

• Education News

• Health News

• Science News

• Scotland News

Times Recommends

• Sarah Brown says 'no thanks' to veal at G8 - twice
• Stockton-on-Tees is obesity capital of Britain
• Stores blame poor sales on Murray factor