Fuel bill rises blamed as inflation rate soars to 4.7%

Rising energy costs contributed to nearly all of the increase in the official rate of inflation, with electricity prices up 18% year on year and gas rocketing by 27.7%.

British Gas was one of two major energy firms to hit households with bill rises at the end of July, followed by other main suppliers in the second half of August.

There was also some upward pressure from higher food prices as the price of bread and cereals rose, largely reflecting increases in the price of breakfast cereals and pizzas.

However, the ONS said falling vehicle fuel prices helped to offset the rise. Oil prices have eased back dramatically from the $147-a-barrel record seen in July, with light, sweet crude dropping to a seven-month low below $100 on Monday.

David Bell, professor of economics at Stirling University, said the increase in inflation would have a number of effects on Scottish households.

"The rise in inflation is a particular problem for people living in rural areas," he said. "This is partly because they have to rely on other types of fuel such as gas for heating.

"But a lot of things that have been increasing in price rapidly are food and energy which are essential items. Other items like clothing aren't increasing as much, but these aren't necessarily essentials'."

The ONS figures also showed falling property prices contributed to a drop in the Retail Price Index for the first time since March. The index, which includes housing costs and mortgage interest repayments, dipped to 4.8% last month, from 5% in July.

However, the Consumer Price Index remains at the highest level seen since ONS records began.

Mr Bell predicts inflation will fall rapidly next year. "There is a sharp peak at the moment," he said. "There isn't much sign of locally generated inflation rate pressure, by that I mean huge increases in wages. I don't think at the moment there is evidence to suggest that wages are rising as sharply as prices. If that's the case then it's likely that the increase will be short-lived."

Following the rise in inflation, Bank of England Governor Mervyn King was forced to write an open letter to Alistair Darling explaining why inflation remains at more than double the official 2% target - the third such letter in his tenure and the second so far this year.

In his letter, Mr King said the Bank "has become firmer in its belief" that a period of muted growth is necessary to return inflation to target. As the rise in inflation was higher than expected, he predicted inflation should peak soon at around 5%.

Although recent falls in oil prices will help moderate the inflation peak, Mr King said there was an increasing danger from a weaker pound.

Sterling has fallen 15% since its peak last July.

Stephen Boyd, Scottish Trades Union Congress assistant secretary, said: "Inflation is not attributable to the wages of ordinary workers. The low-paid in particular are disproportionately affected by rising food and fuel costs."