Inflation fall may not curb debt help need

Britons who are deep in debt may find news that the rate of inflation has fallen only partially relieves their problems.

Earlier today, the Office for National Statistics (ONS) revealed that the Consumer Prices Index (CPI) rate of inflation was five per cent in October, down from September's 5.2 per cent rate.

At the same time, the Retail Price Index – which includes house prices – dipped from 5.6 per cent to 5.4 per cent.

The ONS said that while home energy price hikes and the rising cost of clothes were continuing to push inflation upwards, these had been counterbalanced by lower food and fuel costs.

However, while this may take some pressure off those who have debts by reducing the strain on their budgets, the cost of living remains well above the two per cent target rate and a small drop will not diminish the amount of money owed by many people, who could benefit from receiving debt help to tackle the problem.

The drop in inflation may not be unexpected, as the Bank of England has predicted in recent months that it would reach a CPI level of five per cent and then start to drop back.

And in his obligatory letter to the chancellor George Osborne explaining why the rise in the cost of living is still above target, governor of the Bank Sir Mervyn King predicted it will "fall back sharply in the next six months or so" and be back at two per cent by the end of 2012.

However, the pace of the fall may be hard to judge, Sir Mervyn added, with the chance it could happen more rapidly if the "spare capacity" in the economy is brought to bear, while it may also be slower if retailers put up prices to boost profit margins.

By James Francis