Cost of living soars – but CPI inflation rate stays the same

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One demonstrator on the TUC march on October 20 2012 speaking for the many
One demonstrator on the TUC march on October 20 2012 speaking for the many

Consumer Price Index (CPI) inflation remained at 2.7% in December, according to figures released yesterday, despite electricity, gas and food prices soaring, and wages falling.

The Office for National Statistics (ONS) claimed the CPI figure was ‘static’ at 2.7%, but admitted that the increase in the cost of basic needs was actually considerably higher and the rate was kept down by a dramatic 6.8% cut in air fares, hardly one of the necessities of life for the working class.

Retail prices index (RPI) inflation, which includes housing costs, increased to 3.1% from 3% in November.

By far the largest upward effect came from domestic gas and electricity, with electricity prices up 3.9% and gas prices 5.2% higher, while prices of food and non-alcoholic drinks rose 3.8%.

Unison General Secretary Dave Prentis said: ‘It’s time for the government to get a grip; the reality is that families are struggling to heat their homes and put food on the table.

‘There is yet more misery to come, as the freezing weather starts to bite, fuel bills continue to rise, and wages remain stagnant.

‘It’s time for the government to act; unscrupulous pay-day loan companies are filling the gap that has been created by high unemployment, the public sector pay freeze, and soaring fuel costs.

‘Inflation still remains well above the government’s 2% target, placing enormous pressure on the finances of low and middle income households.’

TUC General Secretary Frances O’Grady said: ‘Inflation has been outstripping wage rises for three years now, which has already cost the average worker £4,000.

‘The hike in energy bills is particularly tough on the poorest households, who spend over a quarter of their income on utility payments.

‘But rather than help these families, the government has just voted to make their financial situation even worse by capping rises in vital benefits and tax credits from this April.’

The average worker will lose around £6,000 by 2014 as a result of wages failing to keep pace with rising prices, according to new TUC analysis published yesterday.

With the latest inflation figures showing that average earnings have now been trailing rising prices for three years, the TUC has calculated that a worker on a median salary of around £25,000 has already lost nearly £4,000 since December 2009, when earnings first fell behind prices.

With real wages now expected to fall for another year, the average worker is set to lose a further £2,000 in 2013, bringing the total wage loss to £6,000 by 2014.

Meanwhile, Bank of England Governor King has criticised the plans of investment bankers Goldman Sachs and others to defer annual bonuses until the new lower top rate of income tax comes in on 6th April when the 50 pence top rate of income tax falls to 45p.

King called the move ‘depressing’ and said he was worried about how ‘the rest of society’ might react.

He told the Treasury Committee of MPs: ‘I find it a bit depressing that people who earn so much seem to think it is even more exciting to adjust the timing of it to get the benefit of a lower tax rate . . . knowing that this must have an impact on the rest of society, when even now it is the rest of society which is suffering most from the consequences of the crisis. . . .

‘In the long run, financial institutions . . . do depend on goodwill from the rest of society. They can’t just exist on their own.’

After King’s comments Goldman Sachs announced yesterday afternoon that it would not be deferring its bonuses until April after all.

• It emerged yesterday that more than 300 agency workers at Honda will lose their jobs on top of the 800 permanent staff sackings announced last Friday.

The contract workers at the company’s South Marsdon plant are expected to be thrown out in February.

A support taskforce is being set up to offer retraining, job-seeking advice and ‘stress therapy’ for the sacked workers.