Today’s inflation figures mean nothing: food prices rocket 30% in 2.5 years while the Tories eye benefit cuts

Inflation has fallen to 4.6% – down from 6.7% in September, official figures now show. However, a think tank has effectively warned this means nothing in the real world. Meanwhile, the government is also reportedly considering cutting people’s benefits in real-terms now inflation has fallen.

Inflation: food prices UP 30% in 2.5 years

With today’s news that inflation is at 4.6%, the Joseph Rowntree Foundation’s (JRF’s) latest cost of living tracker found a third of all families on a low income – 3.8m households – had to sell something they owned just to cope with rising costs. This is virtually unchanged since May 2023 when inflation was almost double what it is today – 8.7%. Meanwhile, at the same time the government is considering a real-terms cut to benefits.

In October 2023, half of all low-income households – 5.9m – reduced meals, skipped meals altogether, or just went hungry – the highest since the JRF began its surveys. A quarter of low-income households said they had borrowed money just to buy food.

This is shocking but not surprising. Using today’s ONS data, JRF calculates overall inflation is 20% higher than in April 2021. Food prices are around 30% higher and energy prices are still up by around two thirds compared to then. Benefits are only 13% higher.

CPI is the change in prices compared to one year ago and today’s fall is mostly the result of the last big energy price hike being 13, rather than 12, months prior to the most recent data.

‘Indefensible’

Responding to today’s inflation figures, JRF chief analyst Peter Matejic said:

The people who had to take on debt in order to eat, or the people who took something they cherished to a pawnbroker just to buy warm clothes for their children, are not feeling the financial security Rishi Sunak promises. They live in a world where their income, in many cases, simply doesn’t cover costs while the Government talks about cutting their support further.

Ministers claim that getting inflation down will make everyone’s money go further but, even after this fall, prices are still far higher than they were last year, rising at more than twice the Bank of England’s target rate. People are still having to go to great lengths just to afford everyday essentials and often are going without.

It’s indefensible that the Government is reportedly considering cutting the benefits of struggling families worried for their future, with news stories suggesting it plans to use today’s figures, instead of last month’s, to fiddle the figures and hide a big cut.

In the upcoming Autumn Statement benefits must be increased in line with inflation and Local Housing Allowance (LHA) must be unfrozen to support private renters with their housing costs. The Chancellor should also take steps to ensure that Universal Credit, at a minimum, always enables people to afford the essentials.

So, what is the government considering doing about benefits?

A real-terms benefit cut looms

Bloomberg reported that:

The UK government is considering using October’s inflation number for next year’s rise in working-age benefits, two people familiar with official thinking said, a move that would hit low-income families.

Ministers are waiting to see Wednesday’s inflation data before deciding how much to lift support for the roughly nine million households on working-age benefits from April. Convention is that the September data is used but the government has refused to make that commitment. Using October’s inflation rate – predicted to come in about 2 percentage points below September’s – would save roughly £2 billion… a year.

This would actually be a real-terms cut – as economics professor Jonathan Portes pointed out:

This would then not be an inflation uprating – it would be a real terms cut in benefits to the poorest purely to finance tax cuts for the better off (very much in the Cameron spirit, of course). https://t.co/lCBfmjbVAz

— Jonathan Portes (@jdportes) November 14, 2023

All eyes will be on chancellor Jeremy Hunt’s Autumn Statement on Wednesday 22 November, where he will reveal whether or not his government will cut people’s benefits.

Feature image via the Canary