Inflation has soared to a new record after gas and electricity price hikes sparked a surge in the cost of living.

Official figures show the Consumer Prices Index (CPI) reached 5.2 per cent last month - the highest reading since 1997 and a 16-year historical inflation peak.

But the Government also faces paying out billions more in benefits and pensions after the headline Retail Prices Index (RPI) reached 5 per cent.

September's RPI - which was last higher in July 1991 - is commonly used by the Government to calculate pension increases for the coming year. Pensions usually increase by 2.5 per cent or headline RPI, whichever is higher.

The headline RPI, less costs such as rent, council tax and mortgage interest payments, is also used to calculate increases in benefits such as Jobseeker's Allowance and income support under the Rossi Index.

The CPI figures are likely to mark an inflation peak as policymakers on the Bank of England's Monetary Policy Committee (MPC) - who cut rates by 0.5 per cent last week - turn their attention towards avoiding a severe recession following the current financial turmoil.

But the data will also serve as warning of a residual inflation threat for MPC, which did not have access to the figures before cutting rates last Wednesday.

Following the price hikes for gas and electricity - and an earlier round of increases in January - electricity prices are up 30.3 per cent year on year, with gas costs up almost 50 per cent.

The annual rate of inflation for energy and other household bills reached 15 per cent - the highest since 1989, while price rises for clothing, footwear, toys and games added to the pressure.

© Independent Television News Limited 2009. All rights reserved.