THE Chancellor of the Exchequer was at the centre of a row last night after Opposition parties blamed him for a sharp rise in inflation which forced the headline rate to its highest level for six years.
The Shadow Chancellor, Mr Peter Lilley, said the increase was a direct result of the Government's tax increases. Liberal Democrat Treasury spokesman Malcolm Bruce said the figures highlighted what was now a ''Jekyll and Hyde economy - a booming consumer sector and a busting manufacturing sector''.
Figures from the Office for National Statistics showed the retail price index jumped 1.1% in April to 162.6 (January 1987 = 100). The headline rate rose from 3.5% in March to 4%, its worst level since May 1992, when the rate was 4.3%.
Underlying inflation, which excludes mortgage interest payments, moved further away from the 2.5% target set by the Government. The annual rate increased from 2.6% in March to 3% in April, equalling its highest level, set in July, since the Government came to power. Under Labour, the target has been hit only twice - in May and in January.
Petrol and diesel prices increased by around 4p per litre after the Budget in March, while housing costs rose after mortgage interest tax relief was reduced from 15% to 10%. The measure was announced by the Chancellor, Mr Gordon Brown, in July, but came into effect last month. Higher council taxes and water charges also boosted inflation.
The Treasury sought to dampen fears inflation was heading out of control. It said a temporary rise had been expected in April because of the short-term impact of Budget tightening.
''Our forecast is for underlying inflation to fall back in July and to remain on track to meet the Government's inflation target over the forecast period,'' it said.
Last week, the Bank of England, which is responsible to the Government for achieving the inflation target, said it expected the underlying rate to rise to around 3% over the next quarter due to Budget changes.
The City stuck to its view there was no immediate threat of the Bank raising interest rates further.
Morgan Stanley chief economist Mark Miller said the figures were ''likely to mean rates may stay on hold for longer but we already know from the inflation report that the Bank is not likely to overreact to the numbers, as they are affected mainly by the Budget.''
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