AS an economic concept, everyone is affected by inflation, writes Jeff Ball, assistant director at Brewin Dolphin.

It is “taxation without legislation” as economist, Milton Friedman once said, influencing everything from mortgages to the smallest of purchases. For me, seeing Cadbury Freddos on sale for 60p because of inflation instead of my childhood price of 10p still fills me with sadness, but that is inflation at its most basic level. Over time, prices go up.

Or do they? Well, at the moment, not by much. The Office of National Statistics (ONS) released its latest inflation figures last month, showing a drop in the Consumer Price Index (CPI) to only 0.5 per cent compared to 1 per cent the previous month.

Inflation as measured by CPI is made up of an ever changing ‘basket’ of goods and services designed to reflect typical households’ purchases. From this, the ONS tracks fluctuations in the underlying prices, with the contents updated regularly to reflect changing shopping trends.

As one such example, if you now use Netflix to watch films, you have helped contribute to DVD rentals being replaced by online on demand subscription services.

Within CPI, food and energy prices are important components and from the supermarket price wars to a falling oil price, is it any wonder inflation is falling?

Understandably, the sizeable Oil & Gas sector has not performed well within the UK’s blue chip FTSE 100 Index and fell 10 per cent in 2014. Food and drug retailers were even worse. But look elsewhere and the repercussions can be positive.

Inflation has been steadily falling since 2011. Amongst other factors, this is attributable to the rise of Aldi and Lidl, spurring the bigger supermarkets into more and more discounts and putting more disposable income back in the pockets of consumers.

Meanwhile on the other side of the Atlantic, the US has embraced the concept of fracking to produce shale gas and oil, leading to exceptionally low fuel costs. Petrol heads rejoice!

However, this has produced an excess in global oil supply coinciding with a fall in demand, particularly from the likes of China, which is experiencing a deceleration in its economic growth.

This has not been helped by the oil producing nations in the Middle East keeping the taps turned on. Historically Saudi Arabia has usually moved first to trim production back when prices were falling, but this time no one is budging.

The big question now is who can hold their breath for the longest. Oil is currently about $50 a barrel, the lowest since 2009 and down from the heady heights of $114 only last summer.

Naturally the big oil producers quite prudently produce what-ifs for both lower and higher oil prices when planning new projects, but what-ifs for 50 per cent falls in six months? Maybe not.

Levels of $70-80 per barrel for the next couple of years would hinder but not excessively damage most of the oil majors, it is if the falls go deeper or for longer then they and markets will be really worried.

Until then, the serious side of the fall in the short term is the risk to North East jobs, with numerous North Sea oil explorers considering mothballing rigs as activity becomes unprofitable. There is talk that the government may radically reduce the tax bill from the current 60 per cent for these explorers, such is the benefit to George Osborne’s treasury coffers when they are fully operational.

But for now, for the man on the street, this low level of inflation is not a bad thing. Petrol is approaching £1 a litre, a level no one really thought we would see again. And this is the crucial point. For those who have not seen their wages keep pace with inflation and suffered a drop in their standard of living, a fall in inflation is basically a tax cut for consumers and one that everyone can benefit from. Even those who still buy Freddos.

Jeffrey Ball is an assistant director at wealth management firm, Brewin Dolphin jeffrey.ball@brewin.co.uk

The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents. Any tax allowances or thresholds mentioned are based on personal circumstances and current legislation which is subject to change.