More gloom must be on the cards today when the Bank of England publishes its latest inflation report after yesterday's surprise jump in prices by 3%. This may look like a modest figure at a time when Zimbabwe is sinking under unimaginable annual inflation of 165,000% and even India is struggling with 7%. However, as every household knows, there is a dissonance between the government's inflation figures and our personal experience at Britain's checkouts and forecourts. This is partly because the prices that people notice are the ones rising fastest. Last month they were food and power, plus (thanks to Alistair Darling) alcohol and tobacco. Other prices, including clothing and footwear, were actually falling. The problem here is that different groups within the population experience different inflation rates, with those on low fixed incomes, who spend a higher proportion on basic necessities, experiencing higher than average inflation. According to the Consumer Council, inflation is running at nearer 9% for some of Britain's poorest households.

A series of news items this week suggests that there is much worse to come.

On Monday, Centrica, owner of British Gas, strongly hinted at further hefty price rises because of the high wholesale cost of gas and electricity. Then April factory-gate prices turned out to be rising at their fastest rate since records began, as manufacturers passed on higher oil and raw materials costs. To cap it all, like-for-like retail sales figures fell for the second month running.

Yesterday, gloom deepened as the latest survey from the Royal Institution of Chartered Surveyors showed that Scottish house prices were starting to fall, having previously bucked the UK downward trend.

Those of the glass-half-full persuasion cling to two things. The number of distress sales in the housing market remains comparatively low, partly because some owners now have the option of selling their homes and renting them back. Secondly, unemployment levels have remained remarkably low so far. However, if the downbeat tone of The Herald's business coverage today is anything to go by, that, too, could be about to change. Yesterday's inflation figures gave sterling another torrid day on the currency markets, mirroring concerns about the long term.

The longer this goes on, the greater the political damage, whether or not this is deserved. It is getting harder for the government to speculate that the disruption caused by the global credit crunch will be short-lived and Britain is in good shape to weather the storm, as the IMF has claimed.

In the current climate, it is incumbent on the government to protect those hardest hit by rising prices. Over the piece, Labour has done a lot for the poorest, especially pensioners and families with children, and the Conservatives talk about social justice but then float ideas such as restoring the married couple's tax allowance, which would effectively redistribute income from the poorest to the better-off.

Labour has let itself down with the 10p tax gaffe and the malfunctioning of tax credits, and now it is walking an economic tightrope. It could borrow more but has limited scope for tax cuts or spending increases, with Mr Darling's growth forecasts beginning to look like starry-eyed optimism.

The US has gone for slashing interest rates and doling out tax rebates to kickstart spending. Given our level of personal debt, Britain would be mad to follow, but if British shoppers slam their wallets shut, the economy would be in a for very hard landing indeed. We may get one anyway, which will come as a nasty shock to those young adults who have known only growth.

If the going gets tough, the government's top priority must be to cushion those who are already spending 20% or more of their income on heating and eating. Meanwhile, we should spare a thought for the Bangladeshi labourer or the African weaver already spending 80% of their income on food, as prices rise every week.