IT WAS 1960, the start of the Swinging Sixties when consumers across the nation were shaking off the grey post-war austerity years and enjoying a new lifestyle with products ranging from Kellog’s Cornflakes for breakfast to prawn cocktails and Chianti at dinner parties.
Yesterday, Britons were given a glimpse of those golden years when the Office for National Statistics’ (ONS) annual “basket of goods” costs statement revealed that inflation had fallen to a record low of 0.3 per cent in January – the last time it was lower, according to an ONS experimental model, was March 1960, when it was minus 0.6 per cent.
And the lowest rate of inflation since records began in 1989 means a basket of goods and services costing £100 in January 2014 would have been just 30p more last month.
The ONS said lower petrol and food prices were the main drivers behind the fall in inflation, dropping by 16.2 per cent and 2.5 per cent respectively in the year to January.
ONS statistician Phil Gooding said average petrol prices had fallen on the month, as had prices for foodstuffs such as milk and fruit, while games, toys and hobbies had also become cheaper.
He added that a slowdown in the rate of price inflation for alcohol and some recreational goods and services had also contributed to the overall slowdown.
The ONS said that while the cost of food and fuel is lower than a year ago, prices for other items, such as clothing and furniture, are rising. The ongoing price war between supermarkets, as the major “middle range” retailers lose out to lower-priced competitors, has also dragged down inflation.
Welcoming the news Chancellor George Osborne, said: “Today we see the lowest CPI inflation ever – a milestone for the British economy.
“It’s great news for families, whose budgets will stretch even further. It shows that those who went around predicting a cost of living crisis were plain wrong.
“And it demonstrates the clear choice between a long-term economic plan that’s delivering stability and rising living standards, and the chaos of the alternatives.
“Although the low inflation is, as the Bank of England confirmed last week, driven by lower food and energy prices rather than damaging deflation, we will remain vigilant to all risks, particularly when the global economic situation is so uncertain.”
Prime Minister David Cameron said: “Today’s low inflation means security for hard-working taxpayers and their families. Let’s stick to the plan that’s raising living standards.”
However, shadow treasury minister Cathy Jamieson MP said falling oil prices would not address deep-seated economic problems. “Inflation is falling around the world because global oil prices have plummeted,” she said. “But in Britain wages continue to be sluggish and working people are £1,600 a year worse off under this government. A few months of falling world oil prices won’t solve the deep-seated problems in our economy.”
TUC general secretary Frances O’Grady also urged caution against using the latest figure as a sign of economic prosperity.
“Low inflation is a sign of fragility in both the UK and global economy,” she said.
The Bank of England last week forecast that the UK could even see negative inflation in the coming months, as energy bill reductions start to be fully realised in the figures, with inflation rebounding later this year.
Governor Mark Carney said should it become clear a more entrenched period of falling prices – deflation – was looming, then the Bank would take action to prevent the possibility of economic activity dropping off.