The official U.K. data on inflation was showing some benign trends prior to the pandemic. The annual rate of consumer price inflation was below 1.2% from April 2020, at the start of the first coronavirus (COVID-19) lockdown, to March 2021. This, of course, was a time when energy prices fell as frequently as they would rise, Ukraine was not under attack from Russia and pre-Covid and pre-Brexit cheap imports could be relied upon to cushion the impact of squeezed incomes.
Even Low Inflation Increased Poverty Risks
Despite the low level of inflation, research from the Joseph Rowntree Foundation found that between 2002/03 and 2019/20 the number of people in very deep poverty (below 40% of median income after housing costs) increased by 1.8 million, from 4.7 million to 6.5 million people. The Foundation’s analysis found that the characteristics of very deep poverty are changing.
“Between 2002/03 and 2019/20 the risk of living in very deep poverty has:
increased by over half for people living in large families (three or more children), to reach 18% or 1.1 million people;
increased by a third for people in families with a disabled person, to reach 15% or 2.3 million people;
increased by a third for people in lone-parent families, to reach 19% or 900,000 people.”
Double Digit Inflation – First Time since 1982
Today, however, recorded inflation has now hit double digits: The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to July 2022, up from 9.4% in June. This is the highest recorded annual inflation rate in the U.K.’s National Statistic series, which began in January 2006. The last time U.K. inflation reached double digits was in 1982.
The largest upward contributions to the annual inflation rate in July 2022 came from housing and household services (principally from electricity, gas and other fuels, and owner occupiers' housing costs), transport (principally motor fuels), and food and non-alcoholic beverages. Rising food prices made the largest upward contribution to the change annual inflation rates between June and July 2022.
One problem with the official statistics is the lag between the collection of the data and their publication. Consequently, the Joseph Rowntree Foundation (JRF) very recently carried out a large survey of poorer Britons (those with incomes in the bottom 40%) in May and June 2022. It found appallingly high levels of deprivation: 5.2 million low-income households (45%) had family members who had cut down on or skipped meals, or who had gone hungry because there wasn’t enough money for food in the month before the survey. 3.2 million (27%) had been unable to adequately heat their home since the start of the year, and 4.6 million (40%) were in arrears on at least one bill.
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