‘True cost’ of inflation revealed

Inflation officially stands at 2.4 per cent, but the Capital Economics research found that debt management for poor people is harder due to rising living costs.

According to the study, pensioners’ costs rose by 8.9 per cent in the 12 months to October, while families surviving on less than £20,000 saw their costs rise by 4.6 per cent.

The shadow chancellor, George Osborne, told the report: “This is a stark illustration of how real living standards are falling, particularly for pensioners and the most vulnerable in society.

“Millions of people are struggling as the cost of living is rising faster than their incomes,” he added, blaming Gordon Brown for contributing to the problem.

The Bank of England does not factor in council tax or mortgage repayments into the consumer price index (CPI), the method used to calculate inflation since 2003.

However, these are often the bills that people have the most problems with and debt advice is often needed to cope with these debits.