The Daily Mail’s Cost of Living Index reveals food prices rising at SIX times official figure
The true, devastating scale of rising prices is revealed today – by the new Daily Mail Cost of Living Index.
It shows that families are having to find more than £100 a month extra this year to cope with increases in the cost of food, heat, light and transport.
According to the Consumer Price Index, inflation is running at only 2.5 per cent.
Yet the Mail’s index finds that food costs alone are rising at 15.5 per cent a year – more than six times the official rate.
And there are double-digit increases in other “must-pay” essentials such as petrol, gas and electricity.
Many families need to find more than £1,200 extra a year just to stand still.
Once higher mortgage costs are added, millions are having to pay out at least another £2,000 a year to keep their heads above water.
The Bank of England’s chief economist Charlie Bean admitted last night that higher food and energy costs are likely to push the Consumer Price Index over 3 per cent this year.
Yet this rate fails to reflect the real problems in homes up and down the country because it includes the cost of luxury items such as flat-screen TVs, whose prices are falling.
It also fails to take increased housing costs into account.
The Mail’s new index has been compiled in association with the price comparison websites uSwitch.com and MySupermarket.co.uk.
It will be published monthly to chart the burden of “must pay” bills as families struggle to keep afloat in the midst of an uncertain economic period.
The figures suggest that a household spending £100 a week on food in 2007 will now have to find another £66 a month or £800 a year.Unleaded petrol is up by 16.5 per cent while diesel has soared by 23.3 per cent in a year – putting up the annual cost of motoring by an average of more than £200.
Gas and electricity are up by more than 12 per cent, adding an average of £100 a year to the cost of keeping the lights on and staying warm.
Increases in train fares, council tax, water and insurance for home and car threaten to tip household budgets into the red.
Uswitch director of consumer policy Ann Robinson said: “We are feeling the strain of food and petrol prices rising at their fastest rate since records began.
“It’s crunch time for UK households as we face a downturn in the economy, below inflation pay rises and the reality of having less money in our pockets.
“We are working harder, but are certainly not getting any wealthier.
“We have less spending money than at any time over the last ten years, yet bills are rocketing.”
Grain and rice prices have doubled in little over a year on international markets, amid shortages which have provoked riots in some countries.
Supermarkets claim they are protecting UK consumers against the worst effects of global food price rises.
However, huge increases are being pushed through in the price of pasta and bread while, because grain is used widely for animal feed, meat prices are climbing.
A chicken could be bought for £2 a year ago. The figure is now £3.54.
A pack of English butter is up by 36p to 94p – 62 per cent; a dozen free-range eggs up 70p to £2.45 – 40 per cent; and a pack of frozen peas is up 46p to £1.52 – 43 per cent.
The organisation’s second inflation measure is the RPI – Retail Price Index – which fell from 4.1 per cent in February to 3.8 per cent in March.
It includes more items than the CPI, specifically mortgage interest payments, rent, council tax and the BBC licence fee, but it relies on the same weighting system.
Economist Andrew Brigden, of Fathom, said: ‘You could certainly argue the CPI understates the cost of living because it excludes housing costs.
“I am sure the ONS accurately measures a representative basket of goods, but the problem is that no one consumes exactly the same basket of goods. For pensioners and others, food is going to take up a greater proportion of spending, but they won’t be buying a lot of flat-screen televisions.’
Help the Aged argues that the official inflation figures are “stuck in fantasy land”.
Special adviser Mervyn Kohler said: “Pensioners are bewildered that the official inflation rate is plodding along at a benign rate when the things they need to buy are rising at a much faster pace.
“The income of the pensioner population is very modest. They are much more affected by what happens on food and energy than things like furniture or plasma TVs, which may be falling.
“The average pension rose by 3.9 per cent this month – around £3.40 a week.
“That goes nowhere near matching the higher bills. Household budgets are going into the red.”
The latest figures from the AA show an average litre of unleaded petrol is 108.1p, up by 16.5 per cent in a year. Diesel has soared by 23.3 per cent in a year to 117.4p a litre.
AA spokesman Luke Bosdet suggested the £5 gallon of unleaded – 110p a litre – would become commonplace within a matter of weeks.
Falls in “must-pay” bills are relatively-hard to find.
In theory the cost of mortgages should be coming down following cuts in the Bank of England base rate.
However, the reality is that many deals are are going up as mortgage firms cover their diminishing margins in the face of the credit crunch created largely by their own risky lending.
Fixed-rate loans are considerably more expensive than a year ago, adding hundreds of pounds to annual outgoings.
Last updated at 13:00pm on 18th April 2008
Source: Daily Mail