UK inflation highest in Western world as food prices soar

3rd March 2010

Britain has the highest rate of inflation in the Western world, figures reveal.

Increasing prices in supermarkets and rising energy prices have pushed the cost of living up in the UK while many similar countries have seen falls.

The Organisation for Economic Cooperation and Development found that the inflation rate in Britain hit 3.5% in January this year - two or three times higher than that of other Western European nations.

Energy prices in the UK soared by 7.8% over the year, said the OECD. However, Germany saw a rise of just 1%.

In their Cost of Living Index, the Daily Mail found that a basket of the most commonly bought foods had rocketed 7.5% in the 12 months.

Although the Government's decision to restore VAT to 17.5% in January has pushed prices up for consumers, VAT is not added to the majority of food products so cannot be to blame for the soaring cost of grocery bills.

In addition, energy bills have remained high despite a fall in wholesale prices since their peak in mid-2008.

Liberal Democrat Treasury spokesman Vince Cable said: "With large profits posted by supermarkets and energy companies it would appear that some of them are taking advantage of their strong market position over their suppliers and customers."

He added: "With a weak pound and an increase in VAT it is inevitable that there would be a rise in inflation. However, the level of inflation in food and energy prices is considerably in excess of many other European countries even allowing for these factors."

The British Retail Consortium denied claims that supermarkets are guilty of profiteering. Its figures show that while food price inflation was a high 2.9% in January, it fell to 1.3% in February.

BRC director general Stephen Robertson said: "Rates of change tell you nothing about the actual levels of prices. UK shop prices are consistently lower than in other EU countries."

He suggest food prices will now remain stable, saying: "Previous falls in the value of the pound and large commodity price increases, which were pushing up food prices, have now largely worked through."

Claims Financial