Family budgets set to rise again as production costs climb at fastest pace for more than 20 years
Last updated at 16:15pm on 12th May 2008
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Soaring food prices have sent household bills rocketing
Soaring petrol costs, Budget tax hikes on alcohol and tobacco as well as rising steel scrap prices pushed up output prices 1.4 per cent between March and April, according to the Office for National Statistics (ONS).
This is the highest monthly increase since records began in 1986 - likely to fuel inflation concerns among Bank of England policymakers and jolt hopes of interest rate cuts.
The price hikes lifted the annual rate of increase to 7.5 per cent in the 12 months to April - also a record - as surging food product costs added to the pressure.
Most economists expect rates to fall to 4.75 per cent next month, but the gloomy figures add to fears that the Bank's hands will be tied by its inflation-watching mandate.
Howard Archer, chief UK economist with Global Insight, said: "This raises serious questions as to whether the Bank will be willing to cut interest rates as soon as June despite current signs that the economic downturn may be deepening and widening."
Meanwhile, millions of families are having to spend almost £1,000 a year extra on food after more punishing price rises.
The annual increase in the price of a basket of essentials surged to 19.1 per cent in May, according to the Daily Mail Cost of Living Index.
The rate has jumped alarmingly from 15.5 per cent in April – a 3.6 per cent rise – and there is no sign of the pressure easing.
And Factory gate prices surged at their fastest pace since records began more than 20 years ago during April, official figures showed today.
Soaring petrol costs, Budget tax hikes on alcohol and tobacco as well as rising steel scrap prices pushed up output prices 1.4 per cent between March and April, according to the Office for National Statistics (ONS).
This is the highest monthly increase since records began in 1986 - likely to fuel inflation concerns among Bank of England policymakers and jolt hopes of interest rate cuts.
The price hikes lifted the annual rate of increase to 7.5 per cent in the 12 months to April - also a record - as surging food product costs added to the pressure.
Most economists expect rates to fall to 4.75 per cent next month, but the gloomy figures add to fears that the Bank's hands will be tied by its inflation-watching mandate.
Howard Archer, chief UK economist with Global Insight, said: "This raises serious questions as to whether the Bank will be willing to cut interest rates as soon as June despite current signs that the economic downturn may be deepening and widening."
There is now a worldwide crisis over supplies of key crops such as corn, wheat and rice. It has triggered food riots in some countries. And in the UK it has brought the biggest rises in bills in a generation.
A family which spent £100 a week on food last year now has to find another £19.10 for the same products, equivalent to £993 a year. Once "must-pay" bills for petrol, mortgages, power and council tax are added, the extra cost is more like £2,200.
Yet the official inflation rate is just 2.6 per cent. Experts say a worldwide drive to produce biofuels – made from corn, wheat and soya as an alternative to oil – is a major factor.
Farmers have switched from food production to biofuel crops.
Last month, the EU agreed the biofuel content of all petrol and diesel should be 2.5 per cent.
This is set to rise to 10 per cent by 2020. But the Government's two most senior scientists, Professor John Beddington and Professor Robert Watson, have called for a rethink on the rush to biofuels.
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Professor Beddington said: "It's very hard to imagine the world growing enough crops to produce renewable energy and at the same time meet the enormous demand for food."
Gordon Brown is understood to be preparing to call on the EU to scrap the plan.
The effect of biofuels on food prices has been dramatic. A litre of corn oil has more than doubled in a year, to £1.38, in one of the big supermarkets. Fusilli pasta, made from wheat, is up 81 per cent, a baguette by 41 per cent and Weetabix cereal 21 per cent.
Farmers are also facing huge increases in feed bills, leading to dearer meat and dairy products. Milk is up 16.6 per cent, English butter by 62 per cent and mild cheddar by 25.6 per cent.
Free-range eggs, which come from hens fed a corn mix, have leapt in price by an alarming 47.4 per cent in a year to £2.58 a dozen.
Basmati rice is up more than 60 per cent in 12 months and Britain's biggest supplier, Tilda, has warned of a further rise of around 30 per cent in the coming year.
Chancellor Alistair Darling has called on his EU counterparts to take radical steps on food prices. He wants "fundamental reform" of the controversial Common Agricultural Policy.
The soaring price of oil is the second major factor battering consumers. Figures from the AA show the cost of diesel has risen by a quarter in the past year, while unleaded petrol is up 15.4 per cent.
The organisation says motorists are the victims of international oil speculators and UK taxes.
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Spokesman Luke Bosdet said: "The oil companies tell us there is no shortage, but market speculators are having a field day gambling on prices.
"It is a pantomime. The Government is threatening to add another 2p in duty in October. We think the Chancellor needs to announce as soon as possible that this will be postponed."
The higher price of oil is dragging up the cost of both gas and electricity.
Householders who have seen a 15per cent increase so far this year face another 25per cent rise by September.
The Daily Mail Cost of Living Index is compiled in association with the price comparison websites MySupermarket. co.uk and uSwitch.com.
MySupermarket offers price comparisons across the big three chains – Tesco, Asda and Sainsbury's.
Many families, however, are changing to budget stores such as Aldi, Lidl and Netto.
Sales of fresh produce at Aldi are up a remarkable 40 per cent year-on-year. The Government's official inflation rate, the Consumer Prices Index, is expected this week to put inflation at around 2.6 per cent.
The Office for National Statistics argues that falls in the price of electrical gadgets, clothes and furniture offset the increases in food. But critics say that fails to reflect real life.
Tim Wolfenden of uSwitch said: "Consumers must be feeling like the rug is being pulled out from under their feet. Every time they regain their balance another set of price hikes knocks them over again.
"However you look at it, 2008 is shaping up badly for British consumers."
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56 people have commented on this story so far. Tell us what you think below.
"The Office for National Statistics argues that falls in the price of electrical gadgets, clothes and furniture offset the increases in food. But critics say that fails to reflect real life."
But I don't buy any of those every week and I can't eat them.
- Bernard, Edinburgh Scotland
This is not just in Britain. Global food prices have rocketed recently. However, people have made so much on their houses in the last few years, that this rise is easily affordable.
- Graeme Carter, London, UK
And where are we supposed to find this extra money?
They are making billions in profit.
Something has to be done soon. Or we will be the country that is going to need food aide!
Or this country is going to become a land of homeless starving paupers!
- Colin, Essex
The Consumer Price Index is very accurate. I buy furniture, clothes and electrical gadgets once a week, but only buy food, gas, petrol etc once a year. If only...
- Marlene Dietrich, Bradford
At the care home I work for, the residents' food allowance has only been increased by 4% since last year which means that we keep having to cut back on what we buy and serve. The company does not want to spend any more on the residents and denies there is a problem.
- David Jessop, Newcastle, UK
I have yet to see something that has gone up by just 2.5% which is what this bunch of shysters tell us is the rate of inflation. The Labour party is around 20 million pounds in debt and has not been in the black for years yet we are told to trust these people with our economy. Look around the world and you see Governments reducing, suspending or stripping various forms of tax and VAT to help their people. What does our lot do, why the only thigh this sad bunch know how to do and that's put up tax again. The fact that our pathetic chancellor is still considering upping the fuel tax says it all. He should have announced weeks ago that this was not to happen. With the extra vat he is getting due to the rising price of crude he could reduce the cost of fuel by 9p a litre but this is the Government of take take and take.
- Duncan Walker, London England
What a ridiculous statement in a market economy.
Spokesman Luke Bosdet said: "The oil companies tell us there is no shortage, but market speculators are having a field day gambling on prices."
If there was enough for the World's needs then the price would come back down - that's how the market economy works. In reality, the oil price is on a one way trip to $200 a barrel and beyond, and in fairly short measure. The only thing that might hold it back is the likely recession in the developed world but that's only going to act as a slight brake, it won't stop the relentless rise. We need to adjust to the fact that over the next generation or so, our living standards are going to drop - the free ride on the back of the petro economy is over for good.
- Kevin Phelps, UK
For decades food has got cheaper in real terms. This is the first significant increase I can remember. Maybe it'll make people buy more cheap vegetables and stop wasting so much food.
- Marty, Altrincham
Expect Gordon shortly to suggest 'let them eat cake'!
- Graham, St Albans
It's much the same over here, I have one good meal a week - as in steak and 5 forms of veggies.
- Caval, Melbourne, Australia
So inflation is at 2.5% is it! in Nu Labour La, La land it may be, but in the real world with us mere mortals it is 18% and rising.
- D Brown, Solihull
Nu Labour government is driving this country to the brink of poverty, where do they think you get the money from for all these extras, my daughter now goes food shopping with twenty pounds to feed three of them.
- Jean Hartell, Wolverhampton England
The government will still tell us inflation is below 3%.
- Robert Morgan, Houghton-le-Spring, Tyne & Wear
When will the public be told the real facts about the EU? It has been responsible for ADDING at least £20/week to the food bills of the average British family for years. In addition our budget contributions ALONE since we joined are worth about £500 Billion at today's values. Yet we are not even being given the opportunity to vote on the EU Constitution which will destroy the UK as a nation.
- Jerry, Croydon, England
When fuel costs increase, so to does the cost of food. It's time for the fuel levy to be reduced, in an effort to bring down food prices.
- Michael, Bedfordshire
How many families drink a bottle of Jacobs Creek Chardonay each week at 64% up and frozen peas up 67% (when you can substitute for veg in season, broccoli, lettuce and tomatoes are all the same as last year)? Take these out of the equation and the statistics are more realistic. Methinks the Mail doth protest too much!
- Sk, East Sussex
The food crisis is caused by the European Union, for three reasons. First it stupidly follows all the fads about green foods and it insisting that grain is converted to petrol rather than being used as food. Secondly, the Common Agricultural Policy is notorious for encouraging and rewarding inefficiency. And thirdly, by preventing a free world market in food it makes food from outside the EU expensive. Remember when we used to have all that lovely butter, cheese and other products from New Zealand? The sooner we leave the EU the better.
- George, Bolton, England
The sooner there is a General Election the better.
New Labour has taxed us all to death especially childless couples and single people who cannot claim tax credits.
- Stephen Holmes, Withington Manchester
2.6%... what a joke. Of course the true inflation figures could not possibly be published as this would have an immediate knock on effect on inflation linked pay claims. Just goes to show that how easily the figures can be manipulated to try con the minions. We can see through you Mr Brown (and cronies).
- Eric Hall, Chester le Street, Co. Durham
Gordon Brown's measure of inflation, the CPI, says it is only 2.4%, do NuLabour really think the public are stupid enough to believe them. To say that "falls in the price of electrical gadgets, clothes and furniture offset the increases in food" is ludicrous - I don't buy these every month, but I do need food, water, gas and electricity on a daily basis. What world do they live in?
- Mo, London
The extra £19 per week could be saved by dropping the alcohol alone. It could be further cut by dropping the chocolate biscuits, extra varieties of breakfast cereals and bread. It is also unnecessary to purchase bottled water when you already buy from the tap! I live on a low wage but get by on food from my allotment and only a few luxuries once in a while.
- Louisa, Winchester
Britain now has the most disreputable, tax thieving government ever. McBean would have us believe that the cost of living increases are down to world finances. Not so! Much is down to stealth taxes, council tax, fuel duty. Hope the electorate of Crewe consider this next week.
- Terence, Hereford, UK
Why are the public constantly been bombarded with price hikes. What was once an essential has now become a luxury full of packaging and surplus tax. Shame on those companies who are starving the public while they can eat all there alarming profits. It just doesn't make sense!
- Suzan Gumush, Kent
'victims of international oil speculators and UK taxes'.
There are no shortages, their GREED is the problem.
- Mickey V, Manchester UK
The official index of inflation needs to be scrapped and replaced urgently with something realistic. The same must be said of Gordon Brown.
- Tom Katz, Weybridge, UK
Re: your price index. Please tell me where you can buy bread at £65p. We pay £1.15 at our supermarket.
- Dennis, Sunderland UK
Brown wants to save the poor of the whole world, why doesn't he resign and grab a job at the UN instead, then maybe we can have a strong PM geared to raise the UK standard of living, where we can all feel secure enough to give generously voluntarily.
- George, London, UK.
So what are this government using to set the less than 3% inflation figures? Luxury goods should NOT be included in these mythical figures, essentials that we can't do without are the answer, but that would really set the cat among the pigeons, the truth might come out!
- Katie, Stoke
And, how on earth do you expect pensioners and retired people, those on fixed incomes and all those paid the minimum wage to exist?
- Kenneth, Suffolk, England
The CPI is a fiddle because the ONS does not reflect how consumer goods prices work.
Yes flat screen TV have dropped in price but they have now effectively replaced the old cathode ray tube TV. The price of a TV has therefore stayed the same not dropped.
When any new technology is introduced it is only the early buyers who pay the ridiculous prices asked.
- Dee Bee, Bournemouth
"We think the Chancellor needs to announce as soon as possible that this will be postponed."
No, the "chancellor" should ABANDON this theft, and REDUCE fuel tax by at least 20p/litre. He will still probably be laughing all the way to the bank even if he did this.
- David, UK
The great drive to save us from global warming is now costing people their lives. Stupid politicians in America and Europe thought Biofuel was part of the answer - tell that to the starving and dying throughout Africa. The EU should prevent the use of Biofuels and put pressure on the USA to do the same. I know I would rather eat than drive my car!
- John, Manchester
Perhaps people will now think twice before wasting food and flying to New York for the weekend. The winner is the environment.
- Anna, Brighton, England
The government would move the "goal posts" if it was appliances costing more and something not on the list costing less.
- Donald A Merritt, Watford Herts
Please do a like for like comparison (historical and current) with the U.S. and others in Europe eg: France, Germany. Then we can see whether the rises are the result of global influences or policies implemented by our current government.
- M Jeffs, Bucks UK
But there's no need to panic - inflation is running at only 2.5% - that's official.
- Martin, Newmarket, Suffolk
Thick sliced white loaf - 65p? Where do you shop? They are £1.20 in my local supermarket.
- Davep, Liverpool, UK
With prices going up hopefully it will stop people throwing out perfectly good food. Should balance out the wastage people have each year.
- Lol, UK
""must-pay" bills for petrol,"
That is LUXURY not "must pay.
You have problems paying for petrol, get rid of the car and take a bus.
- Ragnar Vagmornasson, UK
This country was self sufficient as far as food is concerned, then we joined the EU and they told us what we could and could not grow and how much we could grow. This shambles is the result of ten years of Labour bending its knee to any rubbish dictate from Europe and its destruction of our fishing and farming industry.
- John Phillips, Derby
A 20 kg Basmati rice bag used to cost less than today's price of 10 Kg bag.
- Di, London
I don't believe it - our wonderful Government tells us that inflation is only 2%.
Would they lie? Answers on a postcard please to Gordon McBroon, Temporary PM, Holyrood House (sorry, Downing Street.)
- Mike Randall, Worcester England
This is the time to get Labour OUT.
- Carol, Swansea Wales
It used to be the case that in third world countries people ate mainly rice and cycled everywhere.If things continue as they are in the UK,it won't be too long before we're all eating mainly rice and cycling everywhere. I suppose veggies and environmentalists will think this is progress!
- Mike, Dunstable England
The problem with bread, in particular, is that in this country it is rated as a premium product and so costs more in the first place. In other countries bread is rated as a basic staple and so costs less. My 'granary' loaf costs me anything from 1.48 to 1.60 unless it is on a special offer. I have cut bread now almost out of my life which has not only helped towards the cost of things I like but has helped also to reduce my waistline.
- Joe, Guildford, England
I'd like some of that 65p bread too! Haven't seen it at that price for a very long time...
- Harry Adams, Powys
I have said it all along, "This country is being held to ransom with a gun to its head' by the Macmafia and the Brussel Sprouts!
Their single intention is to close UK Plc down and turn into a prison colony!
- Neil Robinson, Hartlepool, England
Whilst I agree that the western world is being held to ransom by the oil producing States, it must be remembered that initial cost of crude oil is the same to all other nations of the western world. Why, then, is Britain more severely hit in prices at the pump than any of our European partners. The price we pay for diesel and petrol is directly reflected on the price we pay in the supermarkets for our essential food produce. Everything arrives on the supermarket shelves courtesy of road freight and diesel. If the British government’s economic and financial policy had not been so flawed over the last 10 years they would not need to take 65% in pump prices as tax, thus swelling the family shopping trolley by £1000.
- Michael Nye, Colnbrook, England
We now have a really big Tesco Extra in Shrewsbury, we also have Aldi, Netto and Lidl.
I have been round all of them, and Tesco come out cheapest for food on all accounts. So where are these shoppers getting these really cheap prices from when they mention these 'cut price' stores?
I think that these so called cheaper supermarkets have put out signals to people and conning them into thinking that they are cheaper.
Maybe it's where these shops are situated. Is Shropshire more expensive then?
- Jc, Shropshire
Let get back to valuing food. Why can't the young wives make wholesome food from leftovers just like we did in the 30s/40s/50s. The throw away society is in decline, and about time to.
- Peter Pyett, Rhodes Greece
In Morrisons two weeks ago green peppers were 78p, two weeks later they are now 99p, that's around a 27% increase in two weeks. How can inflation be around 2.5%?
- Frank Sloane, Durham
Brown the saviour who has taken a million children out of poverty and a million pensioners out of poverty, who has made five million benefit scroungers the new middle class (they seem to have all the latest mod cons and plenty of beer and cigarette money in my area). The taxpayer has been watching these sneaky tax rises going on for 11 years, and I hope those idiots who voted in this shower three times, feel thoroughly ashamed at their stupidity.
- Carol, Bideford, north Devon
Dennis, Sunderland UK;
Welcome to the planet Earth, Dennis, traveller from another world! Go in any Tesco, Sainsbury, Summerfield, Asda, Lidl, Morrisons etc and you will get a 800g loaf of bread for between 38p to 40p. It's called CHEAP VALUE own brand.
I rarely buy anything else and don't contribute 1p to the 10 Billion pounds of food wasted by all the 'wasters' in the UK. 'Wasters' who are daft enough to pay dear for their food, and then throw a lot of it away cause it makes them feel they're rich!
- Sean Hamerton, York
To Graeme Carter, London, UK - I fail to follow your rational about the increase in house prices cushions the home owners against the rising cost of living - you only realise the added price when you SELL your home, and then you either buy another at an inflated price - or live in "box city" and stuff the cash in your back pocket.
- Michael Nye, Colnbrook, England
Bread at Aldi is currently 37p a loaf.
- Cww, Suffolk
- Djc, Preston
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