Labour and trade union leaders launched an attack on the "austerity-obsessed" government yesterday after new inflation figures showed prices soaring ahead of incomes - forcing workers to borrow to make ends meet.

The retail price index (RPI) rose to 3.3 per cent in August from 3.1 per cent in July.

But wages are growing by just 1.1 per cent, leaving workers trapped in a spiral of falling living standards

Unite general secretary Len McCluskey said working people were facing a "wage siege."

Labour shadow Treasury minister Cathy Jamieson MP accused the government of causing a "cost of living crisis."

And TUC general secretary Frances O'Grady said the coalition was responsible for "the longest wage squeeze in a century" which showed no sign of abating.

The government prefers to quote the lower consumer price index (CPI), which does not include rent and mortgages, for gauging inflation. CPI stood at 2.7 per cent in August, down 0.1 per cent on the previous month as petrol pump rises slowed.

But Mr McCluskey said: "The reason the RPI is so important is that it includes housing costs and is the real rate of the cost of living.

"By whatever measure you use, inflation is at least 2.5 times greater than wage 'increases' which are currently running at an average of 1.1 per cent a year.

"Wages for millions of working people are now under siege and are being eroded on a monthly basis. It will take years to repair the damage done to people's incomes."

Recent research carried out by the union showed that the amount of money hard-pressed Unite members have to borrow each month to make ends meet has tripled since 2012 to £660.

"This reveals the real squeeze that this austerity obsessed government has imposed on millions of UK citizens on low and middle incomes, while the rich elite get richer thanks to George Osborne's generous tax giveaways," added Mr McCluskey.

He repeated his call for a £1.50-an-hour rise in the national minimum wage.

Ms O'Grady commented: "Today's figures show that the UK's so-called recovery is based on house price rises rather than growing pay packets, with the cost of properties rising three times faster than wages.

"This may be enough for wealthy homeowners in London but it's no way to secure a sustainable recovery."

She said forecasts of "real wage growth" in early 2014 was looking "increasingly under threat" and the "long overdue living standards recovery looks set to be put on hold again."

Ms Jamieson stated: "With prices still rising much faster than wages the cost of living crisis under David Cameron continues.

"After three damaging years of flat-lining, working people are worse off by almost £1,500 a year under this Tory-led government. But rather than helping ordinary families David Cameron is so out of touch he has given a huge tax cut to millionaires instead.

"We need action now to help people struggling with the rising cost of living."