Real rate of inflation could be 10 per cent, says John Major

The true annual rate of inflation is as much as 10 per cent, Sir John Major claimed as he warned that Britain was on the brink of recession.

The former Conservative prime minister forecast more job losses and bankruptcies and accused the Government of under-stating the real impact of price rises.

He said changes to the way inflation is calculated had been "extremely misleading", with increasing food prices and heating bills not reflected by the official statistics on the cost of living.

He told BBC1's Andrew Marr Show: "I would say inflation is probably double the RPI [Retail Prices Index] figure, so we're between 8 and 10 per cent."

Sir John insisted he feels "human sympathy" for the Prime Minister's plight. He said: "On a political level, I have very strong disagreements with many of the things Gordon Brown has done. But he's doing an extremely difficult job. He's doing it in extremely difficult circumstances."

He said: "They may be partially of his making but nonetheless it's not helpful to the country or anyone else to have some of the comment about him that there has been and I regret that."

Sir John, who again ruled out a return to public life if the Tories win the next election, said it was impossible to forecast the exact extent of the downturn.

But he added: "We're going to be very close to recession, if not technically in recession – two quarters of negative growth. I think that's entirely possible."

Sir John said loss of confidence in the nation's economic health would have a knock-on effect on jobs and business, adding: "Fear is toxic and it is spreading, and that toxic element, that fear element, is very serious."

He said that ministers would simply have to sit the crisis out. "It's going to take a couple of years to work its way through. Nobody's quite certain how serious it's going to be," he added.