Inflation remains high but damage done as costs of essentials are literally unaffordable
Responding to the latest CPI inflation rate, Alfie Stirling, Chief Economist at JRF, says:
“At 6.7% inflation remains high, but the real damage has already been done. For 7.3 million low-income households, the costs of essential goods and services have reached a level that is literally unaffordable. For those already skipping meals and going without hot water, the rate at which prices continue to rise is now secondary.
"With an unprecedented 15th consecutive rise in interest rates also expected this week, people are increasingly being squeezed from all sides. Not only is the price of money itself rising rapidly – in the form of interest on credit cards, loans and overdrafts – but this is slowing wider spending in the economy too, increasing the risk of lost work and earnings.
“Government can and should be doing much more to protect living standards for those on the lowest incomes. This starts with following the existing rules and raising benefits at least in line with inflation. And poverty charities, national health organisations and the wider public now all agree that the next step is a new guarantee that as a minimum benefits must always cover the cost of essentials."
New analysis: Why benefits must rise, at least in line with inflation, to stop them falling even further behind
- These charts show how prices have increased between April 2021 and today’s data for August 2023, and compares this to movements in benefit levels.
- Overall prices measured by the Consumer Price Index (CPI) have increased by around a fifth (19%) over this period, while food and non-alcoholic drink prices have increased even faster, by just under a third (29%)
- Even though benefits increased in April 2022 and April 2023, and are currently around 14% above their April 2021 value, they have been completely outstripped by rising costs especially that of essentials like food. In fact, food prices have risen about twice as fast as the value of benefits.
- Energy is still 80% above April 2021 levels despite recent reductions.
- If the Government doesn’t at least uprate benefits in its usual way, more families will continue to go without essentials. JRF research found around nine in ten low-income households using Universal Credit are currently going without a range of essentials like food, hygiene products or adequate clothing.
* The inflation rates for different components presented in this analysis are based on detailed data released by ONS as part of today's inflation release, while the benefits series are based on benefit rate data published by DWP.