Downloading PDF. Please wait... Issue 2107

Inflation: the poor pay more

This article is over 13 years, 11 months old
The government’s attempt to massage down figures for the rate of inflation cannot hide its impact on the poor, writes Simon Basketter
Issue 2107

The rising cost of living is leaving millions of workers in Britain in poverty. Spiralling food prices have pushed inflation to a 16-year high.

Rises in the cost of food jacked up the official Consumer Price Index by 0.3 percentage points last month to 3.3 percent.

The slightly more realistic Retail Price Index – which includes some housing and other costs such as council tax – has risen to 4.3 percent.

The underlying reason for this is the spiralling cost of essentials. For instance, vegetable price rises almost doubled from 3.8 percent in April to 7.2 percent last month.

A basic basket of a dozen essential items has soared by an average of 23 percent in the past year. For example, 12 eggs, which cost £2 last May, are now £2.92 – a 46 percent leap. The price of a bag of rice has increased by 93 percent.

A chicken costs £1.50 more than 12 months ago and bread is up 28 percent, butter 30 percent and milk 17 percent.

Food prices across the board have risen by 6.6 percent in the last year, with the cost of staple foods soaring even faster.

A typical family’s annual shopping bill has gone up by about £1,000 in the past year – that’s an extra £2.70 every day.

Figures also show gas and electricity were 11.2 percent more expensive last month than May 2007.

They are set to go up by as much as 40 percent this year. This is another harsh blow for those who are already struggling with the average bill of more than £1,000 a year.

The average price of a litre of unleaded petrol was £1.11 in May, up 16.8 percent in a year. Diesel was up 26 percent to £1.21.

However, the truth about soaring prices is being systematically distorted. The reality is that the rate of inflation for ordinary people is rising twice as fast as the official figures show.

Based on Office for National Statistics calculations, a family in the south west of England with a mortgage and two children faces an inflation rate of 6.5 percent.

If they live in London it’s 7.3 percent. Pensioners are enduring even tougher times. One estimate shows they struggle with a real inflation rate of over 9 percent.

Elderly people are hit hardest by inflation because they spend a larger proportion of their income than other groups on basic goods such as food and fuel.

The official inflation rate is calculated on a basket of 650 goods. Some of the goods used are somewhat removed from most people’s reality – chocolate biscuits were recently taken out of the basket and champagne added in.

The Office for National Statistics also added fees for stabling horses to the basket of goods in spring this year.

But the real problem is the weight given to different items. Utility bills are given similar importance to luxury goods, for instance.

That means that falling prices for flatscreen televisions effectively cancel out rising gas bills in the figures.

So for the affluent, prices might be falling. But the daily necessities that all of us are obliged to spend money on are subject to massive price rises.


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