Families hit by the highest cost of living since 1991 as gap between pay rises and inflation hits record levels



Soaring bills: Families costs are going up on items like petrol, but wages have barely risen

Families are being crippled by the highest cost of living for nearly two decades, disturbing figures showed yesterday.

The retail prices index measure of inflation soared from 4.4 per cent in March to 5.3 per cent in April, the highest level since 1991, according to the Office for National Statistics.

In a cruel blow, it means that Britain's workers have been stung by the worst 'pay cut' since records began.

The gap between the average pay rise - a measly 1.9 per cent - and inflation - a massive 5.3 per cent - has never been bigger, according to the ONS.

For millions of workers in the private sector, the situation is even bleaker because their salaries have been frozen since the recession began.

As a result, the soaring cost of living is a nightmare because their take-home pay has not changed, but their household bills are rising rapidly.

The worst culprit is petrol, with motorists forced to pay a record price at the pumps of £1.22 per litre for unleaded.

The inflation blow came as Nouriel Roubini, the economist known as 'Dr Doom' who predicted the recent crash, said interest rates may have to rise within six months.

He told Channel 4 News that rates, currently at an all-time low of 0.5 per cent, should go up if inflation remains high and the economy is recovering 'more robustly'.

Many other economists predict that the Bank will keep the base rate on hold at 0.5 per cent for the rest of the year.

Yesterday's inflation figures also highlighted the troubles facing Britain's pensioners, the group which finds it most difficult to survive on a fixed income when inflation is rising.



The state pension was increased by 2.5 per cent last month, pushing up the maximum weekly amount by just £2.40 to £97.65.

The annual increase in the state pension is either 2.5 per cent or it is linked to the retail prices index in September, whichever is higher.

If it had been linked to April's RPI figure, rather than last September's, the increase would have been worth £5 a week, or £260 a year.

Neil Duncan-Jordan, from the National Pensioners' Convention, said: 'The problem is that the pension is so low that 2.5 per cent of nothing is still nothing.'

Savers are also feeling the pain of the lowest rates in history.

To beat inflation, a basic rate taxpayer needs to find an account paying 4.63 per cent, and a higher rate taxpayer needs one paying 6.17 per cent, but this is almost impossible.

Darren Cook, from the financial information firm Moneyfacts, said: 'Rises in the rate of inflation continue to antagonise savers who are already struggling to achieve a competitive rate of return on their money.

'Prudent savers are being left out in the cold and are finding it near impossible to combat the effects of tax and inflation.'

The ONS figures also show the Government's chosen measure of inflation, the consumer prices index, jumped from 3.4 per cent in March to 3.7 per cent in April.

This is more than twice the average in the rest of Europe where the average inflation rate is 1.5 per cent.

The Bank of England governor Mervyn King has written to the new Chancellor, George Osborne, to explain how he plans to tackle the problem.

He said he hopes that inflation will 'fall back to target' - which is 2 per cent - within a year, but added he is 'very conscious that there are risks to inflation in both directions'.