The scourge of greedflation

A fifth of the UK is going hungry. Yet this is a crisis the political class seems unable to grasp.

Illustration by Matt Kenyon / Ikon Images

By the time this magazine arrives on your doormat or on the news-stands Rishi Sunak and Jeremy Hunt will have congratulated themselves that inflation has at last fallen back to single figures. The New Statesman went to press before the Office for National Statistics released its latest data, but economists and the Bank of England predict that the Consumer Prices Index (CPI) will average 8.2 per cent over the next three months.

Doubtless the government will claim this as a victory, but the headline inflation rate has become increasingly irrelevant. Like the country’s GDP, it is a crass simplification that is only useful to politicians. For households, a far more important issue is the surging price of food. Food prices increased by their fastest rate for 45 years in the 12 months to March and continue to rise steeply: the consumer data company Kantar found that food price inflation remained more than 17 per cent in April, almost three times the current rate of wage growth (5.8 per cent).

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These figures are worrying in themselves but they disguise further variation in shops and products: the annual inflation rate experienced by someone shopping in Lidl is 24.9 per cent, according to the Which? consumer association. Common supermarket items including own-brand breakfast cereals and some cheeses have doubled in price.

The single most important statistic released this month is not the arbitrary measure of the CPI, but the news that one in five people in the UK had to skip a meal or eat less than they normally would in February and March. This statistic emerged from a poll of more than 10,000 people analysed by the Resolution Foundation, which found that food prices will soon overtake energy prices as the biggest squeeze on household finances.

While the UK is not alone in suffering from food price inflation, recent research by Bloomberg has shown that inflation affecting basic foods is higher here. Its effects are also particularly severe in Britain because we live in a highly unequal society that already had one of the worst levels of food insecurity in Europe. Last year, a million food parcels were distributed to children by one charity, the Trussell Trust, and the number of British children in food poverty almost doubled.

A fifth of the country is going hungry. And yet this is a crisis the political class – concentrated as it is at the upper end of the income scale – seems unable to grasp. Following the Conservative Party deputy chair Lee Anderson’s comments last year that food banks were largely unnecessary as nutritious meals could be made for 30p a day, the MP for Bassetlaw, Brendan Clarke-Smith, recently suggested on LBC that those struggling with food costs should simply buy “Tesco Value” baked beans rather than a brand.

Like the aristocrat in Jean-Jacques Rousseau’s Confessions who was told the peasants could afford no bread and assumed they could eat brioche instead (a line that became Marie Antoinette’s apocryphal “Let them eat cake” remark), some politicians appear incapable of accepting that for some people the most basic possible meal is now out of reach. This is because they do not live in the same economy as those affected. The gap in the inflation experienced by the top- and bottom-income deciles is now the highest on record. Prices have climbed around 10 per cent faster in Aldi and Lidl than they have in Waitrose.

Indeed, some components of inflation (such as asset prices) compound the affluence of the well-off, while the higher interest rates the Bank of England uses to counteract rising prices swell their savings. The “K-shaped” recovery that economists warned could emerge from the Covid-19 pandemic is materialising: one half of society is bouncing back while the other half experiences growing debt and hunger.

Food prices should begin falling, and soon, because the agricultural commodities that underpin them are already much cheaper than they were this time last year (the UN food price index fell by 19.7 per cent in the year to April). But the European Central Bank has warned that some companies have increased their margins simply because consumers expect prices to rise, and that this “greedflation” could endure.

In France, Hungary, Greece and Croatia, governments have struck deals with retailers to cap the prices of some basic foods. In the UK, the government resists such intervention, but it will not be able to ignore the problem for long.