The living standards of families across Britain suffered a further dent yesterday when it emerged the Consumer Price Inflation rate had breached 5 per cent. The latest figures from the Office for National Statistics released yesterday showed that CPI rose from 4.5 per cent in August to 5.2 per cent last month, to reach its highest level since September 2008.
The Retail Price Index, which includes mortgage costs, rose from 5.2 per cent to 5.6 per cent – the highest annual rate for 20 years.
The ONS said that the price rises were mainly driven by soaring domestic energy costs. The average gas bill was up 13 per cent in August and electricity was up by 7.5 per cent.
But the price of food and clothing was also higher. Consumers have been increasingly squeezed by the rising prices in shops this year and retail sales have been flat as a result, as confirmed by disappointing figures from the British Retail Consortium this month. Policymakers at the Bank of England had anticipated CPI breaking through 5 per cent this autumn, but most private sector analysts were taken by surprise by the size of the September increase.
The Governor of the Bank of England, Sir Mervyn King, speaking in Liverpool yesterday, said that "time is running out" to solve the crisis in the world economy, but he stuck to the Bank's forecast that prices will fall dramatically as global fuel prices drop. But upward pressures on prices are likely to linger in the coming months, not least because energy companies have not yet implemented all their announced tariff rises.
Some commentators accused the Government and the Bank of England of turning a blind eye to the impact of high inflation on families and pensioners. Ros Altmann, the director general of Saga, said: "Surging inflation, combined with plunging savings income, are damaging growth by hitting older generations who are having to cut their spending. Continuing to allow inflation to silently steal older people's assets is not a recipe for economic recovery."
The Government, however, denied the charge of indifference. A Treasury spokesperson said: "The Government is taking action to help consumers with current high costs, including cutting fuel duty and freezing council tax."