Brown is blamed again for recession as food costs rocket

Shadow chancellor George Osborne lambasted the Prime Minister for stripping house prices from the official inflation index in 2003, a move critics believe fuelled the property market "bubble".

The attack on Mr Brown came as new figures revealed that the cost of food rocketed last month as the weak pound continued to push up prices in the shops.

Food prices were nine per cent higher in March than a year earlier with meat and vegetables sharply up. The rise more than off-set a 1.5  per cent fall in non-food items and left overall prices in shops up two per cent on a year ago.

The British Retail Consortium, which carried out the survey, blamed the fall in the pound — which has lost nearly a third of its value in the past 18 months — for pushed up import prices.

In a speech setting out how the Conservatives would learn the lessons of the recession, Mr Osborne said that a future Tory government would look closely at including housing in the index to better reflect the real cost of living and prevent unsustainable booms.

His remarks came as it emerged that Mervyn King had also attacked the decision, taken by Mr  Brown as Chancellor.

In a little-noticed section of his evidence to a Lords committee last week, Mr King said that the move had made his job setting interest rates more difficult in the run-up to the 2007 credit crunch.

Mr Osborne also used his speech to the Royal Society of Arts to claim that Mr Brown had today "hoisted the white flag" on his plans for a further big fiscal stimulus to boost the British economy.

Mr Brown appeared to concede in a newspaper interview that this month's Budget would have to focus on getting the country to balance its books once more — interpreted as paving the way for further tax rises and tighter spending.

Mr Brown told the Independent: "It is not just what we do to give real help to people and business now, but about setting a path for the future as well. We always take into account what is [the] best future for the fiscal position."
But he also told BBC Radio 2's Jeremy Vine show that there was a myth that the UK had worse debts than other nations.

Mr Osborne said that the comments showed that Mr Brown was in "full retreat" on the idea of a major new fiscal boost to the economy in the face of opposition from G20 countries and the Bank governor. He also hinted that the Tories would restructure the banking sector into smaller institutions.

"We have banks that are not just too big to fail but too big to bail," he said.

Mr King warned recently that the country couldn't afford a new spending splurge in the Budget. He also told the Lords economic affairs committee last week: "It would have been preferable had we stayed with an index in which house prices were still included."

Economists believe that if housing is included in the official inflation index, consumers would see that as a brake on their behaviour.

The nine per cent year-on-year jump in food prices last month mirrored the increase in February. It compared with rises of 7.5 per cent in January and 6.2 in December, and underlined the strain on household budgets.

The figures emerged after official data confounded expectations that the country would slump into deflation. The Consumer Prices Index rate of inflation unexpectedly ticked up from three per cent to 3.2 per cent.