'Worrying' spike in rate of inflation

Families face a new squeeze on their living standards in the run up to Christmas after a “disappointing and worrying” spike in the rate of inflation.

The cost of living rose by 2.7 per cent last month, the fastest rate for five months, and up sharply from the 2.2  per cent in September.

Government statisticians said the introduction of the new £9,000 cap for university tuition fees at the start of the academic year was partly to blame but there are also ominous signs that food prices are on the rise again.

Confectioners’ “stealth cuts” in the size of sweet packets and chocolate bars — which are counted as a price rise — and more expensive potatoes following a rain-ravaged harvest were among the biggest contributors to a 3.4 per cent rise in the cost of a supermarket shop.

Economists fear that inflation, as measured by the Consumer Prices Index, will continue to rise over the winter as the impact of higher energy bills and further food price increases start to be felt. Flora Maudsley-Barton, director of independent financial advisor, Parsonage Financial Planning, said: “Yes, tuition fees have skewed the data but this can’t detract from the fact that the Bank of England is impotent in the face of inflationary forces.”

City economists now fear the CPI could hit three per cent by the end of the year, well above the Government’s official two per cent target.