Latest inflation figures are a call to action

Victoria Winckler, Director of the Bevan Foundation, says this month’s inflation figures are a call to action

The news that the inflation rate has fallen to 7.3% is being widely touted as good. While any fall is welcome, this rate of inflation is nevertheless well above anything experienced in the last ten years.  It also means that prices are not falling, only going up less quickly than before. A 7.3% increase over the year is still eye-wateringly high, outstripping pay awards and putting extraordinary pressure on household budgets.   

Perhaps the most worrying news in yesterday’s statistics was the continuing high level of inflation for food and housing costs. Food inflation stands at 17.4%, down on May’s figures but still shockingly high. Housing and energy price inflation is lower at 7.3% but with mortgage interest and rents rising I would expect inflation on these items to pick up soon.  

Should we worry? 

Absolutely yes.  Food, housing and energy are essentials that nobody can go without. We know that people on low incomes spend a higher proportion of their limited budget on food, housing and energy.  This means that low-income households already experienced higher inflation rates than better-off households – yesterday’s figures could well widen the gap still further.  

What is the takeaway from all this?  

First of all, as we and others have predicted, the cost-of-living crisis has not gone away. At risk of repeating myself, a drop in inflation of 0.6 percentage points still means the weekly shopping basket and the monthly rent still cost more than last month.  

Second, there is a strong likelihood that people on incomes above the median – which includes most decision-makers – forget the pressure that less well-off households are under and move on to worry about other things.  

Third, this month’s inflation figures mean that the need for government intervention has not gone away. The UK government’s cost of living payments for people in receipt of some benefits are welcome, but they are a blunt tool.  A single person gets exactly the same amount of payment as a family of five, and the ‘lumpiness’ of the payments makes it hard to budget. Indeed, research by the JRF shows that many households used their recent cost of living payments to pay down debt, for example on energy or rent, rather than increasing their day-to-day spending.  

Last, there is undoubtedly more pain to come. Mortgage and rent costs are set to continue to rise, food producers are talking about high food prices becoming the norm and there are no signs of energy costs returning to 2021/22 levels.  

What can the Welsh Government do? 

The Bevan Foundation is a member of the Welsh Government’s Cabinet Sub Committee on the Cost of Living expert group, and, along with others, is urging the Welsh Government to take action.   

We have heard a lot recently that the Welsh Government’s budget is under pressure – £900m short apparently. Quite what has changed since April 2023, when departments and organisations were given their annual allocations, I do not know, but the appetite for additional expenditure in many of its areas of responsibility appears to have all but vanished.  

This is short-sighted. Clearly there is no magic money tree in Cardiff Bay or anywhere else, but keeping people in severe hardship now is a recipe for greater demands on public services in the future. There is a direct relationship between low income and social ills such as poor health, homelessness and unemployment that the Welsh Government cannot ignore.  

Instead of heaving a sigh of relief at the inflation figures, as much of the media has done, we need to redouble our efforts to relieve the pressures on Wales’ lowest income families.