RPI INFLATION soared by 5.3 per cent last month, indicating that a huge cut in workers’ wages and a major hike in the cost of living had taken place in April.
The reaction of the Unison union to this 0.9 per cent rise was to warn local government bosses yesterday that they’d better ‘get real’ on pay.
Food, fuel and clothing price rises, along with increased duty on alcohol and cigarettes, pushed up the inflation rate to its highest in 17 months.
The figures prompted TUC General Secretary Barber to urge the Tory coalition government not to jeopardise the ‘recovery’ by raising interest rates.
On the Consumer Prices Index (CPI) measure, which does not include mortgage costs, inflation rose from 3.4 per cent to 3.7 per cent – well above the target of two per cent and the highest rate since November 2008.
On the Retail Prices Index (RPI) measure, which includes housing costs, inflation was up to 5.3 per cent – its highest rate in 19 years.
The RPI measure is commonly used to decide pay rises or pension payments.
RPIX inflation – all the RPI items excluding mortgage interest payments – was 5.4 per cent in April, up from 4.8 per cent in March.
The Office for National Statistics (ONS) said food prices in particular had seen sharp rises.
The cost of food rose by 2.6 per cent, the ONS said, thanks largely to rising transport costs over the last 12 months.
Fuel costs have increased by more than 25 per cent in that time, the ONS said.
Higher duty on alcohol and cigarettes, introduced in April’s Budget, added to inflation in April, while clothes prices also rose.
Bank of England governor Mervyn King was forced to write a letter of explanation to Chancellor, George Osborne.
In his letter, the governor said inflation had accelerated significantly since September last year.
He blamed rising fuel prices, the rise in VAT and the fall in the value of the pound for the rising trend.
He stated that these ‘temporary factors’ were ‘masking the downward pressure on inflation from the substantial margin of spare capacity in the economy.
‘If the recovery continues as expected, that will gradually erode the slack in the economy, bringing inflation back to target,’ King hopefully claimed.
In his reply, Osborne said he noted that the Bank’s view was that the ‘current elevated rate of inflation is expected to be temporary’.
‘I am sure that you will remain vigilant towards any upside risks to inflation,’ he added, implying that rates could rise, bringing about the nightmare of all mortgage holders.
Unison called on the local government employers to get into talks on pay, as news of the 5.3 per cent inflation rate equals misery and the descent into poverty for millions of local government workers, currently being hit with a pay freeze which the present government intends to extend indefinitely.
Dave Prentis, Unison General Secretary, said: ‘Inflation hitting more than five per cent means misery for local government workers and their families.
‘As some of the lowest paid staff in the public sector, many of them already struggle to make ends meet.
‘In England alone, councils have billions in unallocated reserves, just sitting in their bank accounts.
‘There is money available to give staff a decent rise, but not the political will.’
TUC General Secretary Brendan Barber said: ‘Today’s figures are disappointing but the Bank must resist calls to raise interest rates.
‘Inflation is still forecast to fall below its two per cent target in 2011.
‘To raise interest rates while the economy faces a £6 billion spending cut would increase the risk of plunging us back into recession.’