London - Consumer price inflation fell sharply in Britain in December to an annual rate of 3.1 per cent from 4.1 per cent in November, the Office for National Statistics
(ONS) said Tuesday.

The biggest factor behind the fall was the temporary reduction in Value Added Tax to 15 per cent, decreed by the government in late November as part of an effort to stimulate demand.

The headline rate of inflation measured by the Retail Prices Index (RPI), which takes into account mortgage costs, fell to 0.9 per cent from November's rate of 3 per cent.

Falling petrol prices and discounting in shops before Christmas also helped reduce inflation, the ONS said.

"Inflation is most definitely yesterday's story. Unless the huge stimulus from the VAT reduction, record low interest rates, a falling pound and the collapse in the oil price begin to take effect soon, the UK will be staring deflation in the face," said Graeme Leach, chief economist at the Institute of Directors. (dpa)