Why the 'British problem' of rising food inflation is causing misery for Labour voters: Greg Wright
The world’s finance ministers are worn down by troubles that most of their neighbours share, such as the impact of US-imposed tariffs and tensions caused by conflicts in Ukraine and the Middle East.
Unfortunately, Chancellor Rachel Reeves is saddled with something that analysts have described as uniquely British, a problem with inflation which is causing misery for shoppers on low incomes. The rate of Consumer Prices Index (CPI) was 3.8 per cent in August, the same as July. This was the level that most economists had been expecting for the month, and it means overall inflation remains well above the UK’s 2 per cent target rate. However, the rate of food and drink inflation rose to 5.1 per cent in August, from 4.9 per cent in July.
It marks the fifth month in a row that the annual rate has increased and means it is the highest level recorded since January 2024. Several large retailers and supermarkets have blamed rising business costs, such as employer national insurance contributions and new packaging taxes, for stoking food inflation in the UK.
Kris Hamer, director of insight for industry group the British Retail Consortium, said: “With food inflation now outpacing wages, many families will be struggling with the rising cost of living.”
He called on the Government to “turn the tide” at the upcoming autumn Budget by cutting business rates rather than choosing to “burden the industry with more costs”.
Nicholas Hyett, Investment Manager at Wealth Club, added: "Overall inflation is stuck at nearly twice the Bank of England's target rate. For poorer consumers the effective rate is probably higher still, since food accounts for a larger proportion of their total spending and food prices have risen 5.1 per cent year-on-year.
“Stubbornly high inflation means it's unlikely that the Bank of England can bail out the economy with cuts. That is doubly bad news for the Government, which desperately needs either growth to pick up or rates to come down in order to free up some financial headroom."
“UK inflation is now appreciably higher than rates we see in European peers or the US, and a lot of that is probably down to own goals on the Government's part.
"Things like food retail and hospitality employ large numbers of comparatively lowly paid staff, where simultaneous increases to employers' national insurance and the national living wage have substantially increased costs and led to a corresponding increase in prices. Big increases to public sector pay are also still feeding through sectors like education and healthcare.”
Treasury Chief Secretary James Murray denied that Government policies were behind increased supermarket prices, instead blaming global market pressures. However, as Rami Baitiéh, the chief executive of Morrisons, noted on Wednesday, Britons are feeling the squeeze as inflation increased further over recent months. Many of these shoppers will be life-long Labour supporters who will be wondering why consumers in our neighbouring countries aren’t facing the same pressures. It will require a near miracle of financial management from the Chancellor at the next Budget to ease the strain on Britain’s poorest families.
Greg Wright is the deputy business editor of The Yorkshire Post