Everybody knows that prices are rising, so five weeks ago the Sunday Socialist launched our shopping basket, an attempt to keep track of a range of budget items to see how the real cost of living looks to ordinary people. We chose to use Aldi as our shop of choice, not because we like it particularly, but it is widely regarded as a budget shop, which means if prices are rising there, then there is a good chance they are being felt by the poorest sections of the community.
The items we have chosen are, in some respects, fairly random and may not be those you would find in your own basket. But they are also common items: bread, breakfast cereal, milk, baked beans, crisps and biscuits.
The Government issues monthly updates on the rate of inflation, and for March 2022 it was 7%, the highest it has been since 1992. Inflation is calculated as an annual figure which means that, according to government sources, prices are 7% higher than they were one year ago. This annual inflation rate is important, but it hardly tells the story for people already struggling.
The pressure of rising prices is compounded by the problem of static income. Most people receive an annual wage or benefits increase. According to the ONS, average wage growth was 4.8%, but, if you exclude bonuses, it was only 3.8%. Of course, these averages hide huge variations. In the private sector average pay increased by 5.3% whilst public sector employees (nurses, teachers, emergency workers) saw only a 2.4% increase.
Pay and inflation
Let’s just think about what this means. If in March 2021 you were earning £600 per week (the average weekly wage according to ONS is £596), by March 2022 you might have received a pay increase somewhere between £14.40 and £31.80 per week. However, your costs would have increased by around £42. Each week you would be short by between £10.20 and £27.60. Over 12 months, if prices stabilised, you would be short of between £530 and £1,435.
And, here’s the rub, prices are not standing still. Month on month it is estimated that food prices will rise by 0.53% per month, which sounds very little. But we have to remember that for those already struggling, these types of increases, which fall disproportionately on the poorest, are in addition to a real struggle to make ends meet.
The New Economics Foundation has estimated that 23.4 million people will not be able to afford the cost of living increases. The average lower income person spends roughly £50 per week on groceries. If that basket of groceries rises by only 1% week, every week by the end of that year it will cost £83, a rise of 66%.
The poorest in our society have already received their 3.1% increase to cover the increase in prices from the previous year. But, as we are seeing with these 14 items, prices don’t increase annually, they increase weekly (in fact, prices go up daily) but there is no increase for those on low incomes to cover these costs.
The real cost of food inflation
In the five weeks since we launched our basket, 6 of the 14 goods have already increased. The rise has been the equivalent of a 4.3% increase. And, just to be clear, that is not an annual increase. Goods have not increased 4.3% since June 2021. This increase is in one month. Forget about inflation at 7.8%, our figures show food inflation rising at something like 52%. That figure represents the real cost if food continues to rise at 4.3% every 5 weeks.
How do they achieve this? What we are seeing is ‘small’ increases on one or two items in a week of 10p here or a few pence. This may not seem like a lot of money, but, if you are already struggling, that 10p a week, and it is now running at 53p in our rather small basket of 14 goods, is the difference between getting through and not getting through.
The Government has no plan to help low income families. Cabinet minister George Eustice has suggested people should try to make ends meet by buying value ranges rather than branded groceries. The Secretary of State for Environment, Food and Rural Affairs admitted soaring food and energy bills would “undoubtedly put a pressure on household budgets” but he maintained it could be managed by shopping more wisely.
Spend more wisely
Spend more wisely. So, let’s say you can spend wisely, but, regardless, every week your basket of goods rises by just 1%. That might be 5p extra for some crisps (as this week), or maybe a bit more for milk or bread. I think we can all agree that, as we walk around the supermarkets, prices do not stay the same throughout the year. Sometimes food prices rise and fall according to seasonal demand. But, my experience, and I am sure yours too, is that food tends to go up, it rarely comes down in price.
There is no way out of food poverty for those on low incomes, other than by taking out more debt. Most people have some debt, and debt itself has now become big business with the 2011 Census revealing that the total debt in the UK was £1.28 trillion, half of which was mortgages.
This is not sustainable. The average person in the UK now has £3,797 of personal debt. Credit card debt is running at £2,173 per household.
People on low incomes typically cannot get loans because they have low credit ratings. They are reduced to borrowing from pay day loan companies, or sharks as they are better known. Despite the Financial Conduct Authority bringing in stricter rules, the payday loan industry is still worth around £220 million each year. Rates of interest typically top 85% APR. If you borrow £200 for a month, at the end of that month you will owe £213.76p. Now if you are borrowing to pay for daily living expenses, which were already more than your income, where on earth are you supposed to find an extra £213.76p? It’s a trap. And you are caught. No matter which way you turn there is simply no way out.
We need a total overhaul of the way in which finances are managed. Even people on relatively good wages are struggling to make ends meet. Surely that is as good an indication as you are likely to get that debt is not some kind of personal failing but a systemic problem which requires a systemic approach to solving it. That millions of children do not get enough to eat each day should shame us all. That so many people blame their parents for being poor shames our society. Nobody chooses poverty. It is not a lifestyle choice, it is a combination of bad luck and systemic barriers.
Critical Mass will continue to monitor prices and update these figures on a regular basis.
The information in this article has appeared in The Sunday Socialist.