/ Money

Opinion: inflation isn’t one size fits all

Price rise news is everywhere you look, but increases have the biggest impact on those who can least afford them. How are rising prices affecting you?

For a decade I’ve relied on the McDonald’s Wrap of the Day as a £1.99 ‘meal of last resort’. People may (and do) mock that I know exactly how many slices of cucumber are in the Sweet Chilli wrap (three, much to my chagrin).

But the wrap is to me one of those rare things, a true constant: always the same price. Such examples of 0% inflation are a long way from ‘real’ inflation as measured by the Consumer Price Index (CPI). This is at its highest for 30 years (5.4%) and set to rise further.

Which groceries have inflation-busting price rises?

Rocketing prices of the cheapest foods

CPI is based on the price of a basket of goods that’s supposed to be a microcosm of the nation’s buying habits. But how representative is it when it contains cigars, liver, coal and even private school fees?

In February, anti-poverty campaigner Jack Monroe scorned headline inflation figures by highlighting the rocketing price of the cheapest foods. While Charlie Bigham’s posh lasagnes have been the same price for years, Asda’s cheapest dry pasta has doubled in price since 2020, she said.

What’s more, some cheap supermarket options have been discontinued, or aren’t available online or at smaller stores. This matters for two reasons. First, food is responsible for a bigger chunk of the poorest families’ monthly spend, so rises have a bigger impact. And second, they’ve nowhere else to go.

Which supermarket is cheapest every month?

Hitting the poorest hardest

When prices rise on TVs or cars, we can delay or decide against buying a new one.

But when you rely on the lowest-priced pasta you can’t just skip food for a week. That’s why Monroe’s new ‘Vimes Boots Index’ promises to be vital in seeing the effect of inflation on the poorest. Named after a character in a Terry Pratchett novel, who argues poverty causes greater expenses to the poor, the index will track the price of a basket of the most basic goods.

The government must act to ease the cost of living crisis, but supermarkets too have a responsibility to keep essential items affordable for the most vulnerable.

How are rising prices affecting you? What more do you think that needs to be done to ease the cost of living crisis amid rocketing inflation?

Comments

”The government must act to ease the cost of living crisis, but supermarkets too have a responsibility to keep essential items affordable for the most vulnerable.”.
Unless supermarkets are profiteering or deliberately avoiding stocking “cheap options” I am not sure what we expect them to do.
Food is essential, of course, and once again unless the producers are profiteering (are they?) then we are in the hands of the market. What the government can do, but it is not simple, is to identify those genuinely in hardship and target benefits accordingly.

How representative is (CPI) when it contains cigars, liver, coal and even private school fees?

Indeed. Easy to see why the current government likes it.

I thought coal had been dropped in the latest review.

We eat liver quite frequently, and private school fees are a significant component of many people’s budgets.

Which? report the best priced supermarket each month. Lidl and Aldi fare well. It is good to see they no longer only include branded goods but “equivalent” own brands. It would be useful if they listed all the items and makes for the survey; I hope one basket will include essentials only.

Liver is a nutritious food and generally cheap (apart from calve’s liver) but not to everyone’s taste. Meat generally is expensive but not necessary to use in large quantities.

John says:
21 March 2022

About 6% of children go to private school, so while costs may be “significant”, it hardly impacts “many people”. To add insult to this, 60% of those private school kids come from households with incomes over £300k – I would suggest that the impact on these people is a lot less significant than the increase of basic foodstuffs.

I don’t know to what extent the prices of various minority purchases get weighted to reflect their significance in the index.

The basket of goods and services needs to cover a wide range of items that make up household expenditure. It could be that in the overall scheme the effect of such elements does not distort the general outcome. Bear in mind that it is the movement of prices of the different components rather then their absolute value that is being measured.

As Ian has pointed out further down this page [see: https://conversation.which.co.uk/money/inflation-food-prices-harry-kind-opinion/#comment-1648870 ], each segment of the population has its own inflation rate; for those on low incomes or at home all day the price of certain essentials like food or energy will have a greater proportionate impact than for more affluent households with more discretionary expenditure in their budgets. It’s probably not possible for a single index to represent this unless policies for relieving poverty consciously counteract this bias.

Not all children at private schools are from high-income families.

There are many children on scholarships, and although the main school fees might be paid for, money may still have to be found for school uniforms, equipment, stationary, trips, etc. and the many incidentals that crop up.

Technically, Alfa, children whose parental income is below that at which the full fees should be possible should not be deprived of any of the items you list through lack of finance. Legislation requires schools to ensure that isn’t an issue. Not so easy for the child, however.

Legislation might have changed since I was at school, but there were many optional extras that were not really optional, and much of my uniform came from the second-hand shop.

In 2018 the Government ruled to prevent schools charging parents for any educational activity that takes place during school hours.

In addition, they ruled: “it is important to note that no child should be excluded from an activity simply because his or her parents are unwilling or unable to pay. If insufficient voluntary contributions are raised to fund a visit, or the school cannot fund it from some other source, then it must be cancelled. Schools must ensure that they make this clear to parents. If a parent is unwilling or unable to pay, their child must still be given an equal chance to go on the visit. Schools should make it clear to parents at the outset what their policy for allocating places on school visits will be.”

While that appears to be a good policy, it could, perhaps, blackmail some parents into paying for a school visit or trip which they could hardly afford since the alternative would be that the outing was cancelled and we can imagine how the other pupils would react to that.

I don’t know the current arrangements with almost all public sector schools now being independent academies, but in the days of direct control by local education authorities every school had a necessitous clothing allowance so that no child need be without the full uniform and kit, and capitation allowances were designed to ensure that there were adequate funds for musical instruments and scores, equipment and materials for practical lessons, and all required learning materials. This had a parallel purpose in reducing the opportunity for elitism. As ever, the allocation and dispensing of the funds relied on the competent and conscientious actions of the school leadership but that was rarely in question in those days.

Ian, https://conversation.which.co.uk/money/inflation-food-prices-harry-kind-opinion/#comment-1648920
A link to this ruling would be helpful.
This is an earlier one I found:
https://childlawadvice.org.uk/information-pages/charging-for-school-activities/
However, there is no mention of private schools, which is what alfa referred to.

Private schools are (largely speaking) unaccountable to the Government and its strictures, probably because so many cabinet members were educated privately. So they’re treated mainly as businesses / charities. The charity aspect ensures great tax benefits, for both the schools and the parents, and outlining these benefits has become quite an industry in its own right.

For those concerned about inequitable distribution of cash, it’s sobering to realise that both Eton and Dulwich colleges are registered as charities. Thus the top 5% of UK earners deprive the public purse of millions each year, quite apart from enjoying extremely well-paid positions when they leave, despite their often dismal education achievement (ever wondered why we have almost no STEM cabinet members?).

Presumably you are confirming that “In 2018 the Government ruled to prevent schools charging parents for any educational activity that takes place during school hours.“ does not apply to private schools. Is there no link to this statement? It would be useful to see all that was said.

Parents have a right to choose how they can best educate their child, one of their most important decisions. Many will make sacrifices to pay for this and they are free to make this choice.

malcolm r says: Today 11:13
Is there no link to this statement? It would be useful to see all that was said.

I’ll try to find chapter and verse, but your summary is about right.

Parents have a right to choose how they can best educate their child, one of their most important decisions. Many will make sacrifices to pay for this and they are free to make this choice.

I don’t believe I’ve said otherwise. A link would be useful. That aside, you raise an interesting point.

Many will make sacrifices to pay for this

Indeed, but the ‘sacrifice’ each makes is interesting. As one who fervently opposes the majority being penalised financially for the omissions of a minority does it not concern you that the treasury is being deprived of millions by the actions of those who can most afford to make contributions?

If we check the facts, according to the Independent Schools Council Annual Census , average fees for day schools are about £15,000 a year. For boarding schools it’s £36,000. Unsurprisingly, analysis by UCL finds that the proportion of children attending private school is close to zero across most of the income distribution. It starts rising slightly when you get to the richest third of the population but only rises to above 10% of children among the richest 5%.

So hardly an equitable or fair distribution.

I have not said it is “equitable” but simply that where we are now allows parents to make a choice. Just as they can with non-educational activities that can benefit their offspring – paying for sports training, music, helping them on the housing ladder, private medical treatment, cultural holidays…….. It is not an equitable world.

Private education benefits, apparently, many apart from politicians – https://www.gov.uk/government/news/elitism-in-britain-2019

I hope we are not implying that all these people are worthless and only where they are because they were privately educated? It seems that in many cases they had a more worthwhile education. So surely what is needed is to bring state education up to the same standard, and that means investing more of our money in producing decent teachers, reducing class sizes, offering more than just basic subjects. It is an investment in the country’s future.

Those who wish, in the meantime, to help could, presumably use some of their wealth to donate to their local school, encourage like-minded people and business to do the same, form fund-raising activities, and directly help buy donating skills, such as music teaching perhaps.

However, as alfa said in response to private school fees being in the CPI, “ Not all children at private schools are from high-income families.” and, while we have the present system, the fact remains that parents have that choice, and many make sacrifices to exercise it.

I would have thought the availability of private education was taking a substantial burden off the state in return for a modicum of tax relief through deemed charitable giving.

I wouldn’t be so sure that the public schools are still turning out students with dismal education achievements. They clearly achieve the necessary attributes to reach high positions in various occupations most of which have respectable academic expectations.

Do we need STEM cabinet ministers? I think law, management, economics, social sciences, medicine and environmental studies are possibly more relevant for a range of ministerial careers. The civil servants are there to provide the technical knowledge.

I suspect when so many government pronouncements centre around figures, it might help if some of the cabinet were at least capable of grasping them.

I hope we are not implying that all these people are worthless and only where they are because they were privately educated?

Has someone done that? I am shocked. Perhaps a link would help?

and only where they are because they were privately educated?

Really? Do you have evidence for that assertion? A link would help.

It seems that in many cases they had a more worthwhile education. So surely what is needed is to bring state education up to the same standard,

It seems that in many cases they had a more worthwhile education.

There are, in general, only two advantages of private schooling: one is a smaller class size, something which numerous Tory politicians have argued repeatedly is unfeasible. Odd; at one time their argument was it would mean building more schools, then, when demand dropped so school buildings were being left empty, they argued the land must be released for housing. Strange that; you’d almost think those politicians wanted a two-tier school system

The other, far more sinister, reason is social selectivity. “Knowing the right people” has been a mantra I’ve heard forever, it seems. and that’s exactly what the elite schools manage so effectively.

This summary https://www.gov.uk/government/news/elitism-in-britain-2019 gives some ( perhaps surprising) figures of those in different occupations privately educated, regarded as “leading figures”. Are they such simply because they were from a private education environment, with connotations perhaps of “connections”, or did that education prepare them better? Would we have such people if private education were abolished?

Like it or not, the economic future of our country depends upon well educated people and we should do all we can to encourage good education. Banning private education on principle for, perhaps, political mantra, is a negative approach. Raising the standard of general education should be the objective.

An obsession with education mantra (my view – no link) has led to another problem – that of giving as many as possible a university education. Two problems, at least. It takes people away from training that would be more beneficial – vocational training for example. And the failure to recognise that there could not be sufficient resources made available to ensure such academic education would maintain the quality provided before that policy. So we have a larger number of poorer quality universities, dubious courses, and graduates who are not needed or appropriate for the careers available.

I recognise I have departed a long way from the topic of this Convo – “Opinion: inflation isn’t one size fits all”. Sorry about that. Perhaps this string of comments ahould be transferred to the Lobby?

There’s a lot in what you say there, Malcolm. What has happened over the past seventy years, I believe, has been the gradual realisation that education is not the ‘magic bullet’ so many craved in the past. Simply acquiring information is only a single aspect of a good school curriculum.

The Public schools have never lost sight of the reasons for their creation; to equip their charges to control. And now it makes sense for them to have as many supporters as possible in positions of ‘influence’. Some of the schools are almost ancient; King’s (Canterbury) dates back to the sixth century, so children attending such august institutions are reminded on a daily basis of their history. Eton, for example, founded by Henry VI, among others was established primarily to prepare pupils for clerical duties, and it proved extremely difficult, not to say impossible, to separate the inherent dominance of the church from the ethos of the schools. A side effect was that of endowing the pupils with an arrogance possessed by so many of the ‘educated classes’ in post Mediaeval England.

When such schools have the children 24/7, however, what those children do outside of the classroom increases in importance quite dramatically. And therein, I suspect, lies a problem.

This thread was discussing “private schools”, of which there are about 2600, around 10% of UK schools. These generally, I suspect, provide smaller classes and a broader educational syllabus than state schools but do not set out to put their charges in positions of power.

Among these are the so-called “public schools” that are said to be more “prestigious” and, together with some Oxbridge colleges, guided their pupils in particular directions. Such elite establishments exist in different guises everywhere, I presume.

My views were around the “ordinary”, mainly day, schools that charge fees to parents who choose to use their services on the assumption they will be of greater benefit to their child.

There are a number of private day schools near us and they are oversubscribed. They are clearly within the means of many families with decent [probably professional] incomes. The state schools [academies] are not bad, and some are rated as outstanding, but some people obviously prefer something different and believe it will be better.

I went to private schools and wouldn’t say the quality of education was always exceptional but the social mix was obviously filtered, and I think that is what makes the difference and is the appeal to parents: their children will be brought up alongside ‘people like us’. The downside of this factor is that state schools are thereby deprived of certain cohorts thus preventing a truly comprehensive and inclusive education process. Not unnaturally, elitism is a by-product.

I used to think that the state school system with secondary grammar, secondary modern, and secondary technical schools should have neutralised the inconsistencies for pupils over eleven but it didn’t. It was far too rigid, there was virtually no transition between the types of school as pupils’ abilities, aptitudes and ambitions changed, there were very few ‘technical’ schools, and there was a hierarchy of teaching competence which disadvantaged many pupils in more deprived areas [teachers could not be moved from one school to another in order to equalise academic standards across a borough or county]. Even within the comprehensive school sector, where the notion of ‘parity of esteem’ was assiduously propagated by the education profession, there were rigid distinctions, cultural imbalances, and a lack of flexibility so the quality of education delivered was almost a matter of luck. For many affluent parents this was too risky so they opted out. Thank goodness that most children are fairly resilient, but those with the least favourable circumstances will always struggle.

I think that sums up the current situation very well, John. I would only add there are no quick or easy fixes; education is an enormously complex and challenging topic. However, we do know for certain some things: smaller classes are better for children in the main. Disruptive or troublesome children have a disproportionate effect on the learning in those classes in which they misbehave. Same staff find teaching too challenging. Dealing with those issues alone requires very hard choices, and extra finance. Usually a lot of extra finance.

Those academies and schools who have been rated as ‘Unsatisfactory’ can be reclaimed. but the human toll can be very heavy. Not an easy job, teaching.

This isn’t a simple issue. For starters, there are three measures of inflation which the government use to determine the rate of increases: The Retail Price index. the Consumer Price index with housing and the Consumer price index all measure different things.

RPI includes mortgage interest payments: this means it is “heavily influenced” by house prices and interest rates
CPI measures takes no account of housing costs: but factors in all the other goods and services
CPIH, includes housing costs but uses an approach called “rental equivalence”: this is not the mortgage payments but how much rent the householder would pay for an equivalent property.

In January 2022, RPI was significantly higher than CPI:

RPI – 7.8%
CPI – 5.5%
CPIH – 4.9%

Here’s a list of items that are linked to RPI:

Final salary pension payments
Income from index-linked annuities
Income from some index-linked bonds
Train tickets
Mobile phone tariffs
Air passenger duty
Car tax
Tobacco duty
Alcohol duty
Interest on student loans

Here’s a list of items that are linked to CPI:

State pension
Public sector pensions
Lifetime allowance for pensions
Personal independence payments
Attendance allowance
Jobseeker’s allowance
Universal credit
Housing benefit
Income support
Statutory maternity and paternity pay
Statutory sick pay

The government tends to link its own spending, such as benefits and the state pension, to the lower CPI figure.

CPI is now at 5.5% as UK inflation rises to its highest level since 2008. The latest RPI inflation figure was 7.8%.

Just thinking out loud . . .

The furlough scheme during the Covid-19 epidemic represented a massive transfer of funds from the state to individuals, and others have made significant savings on road and railway transport costs due to working from home. Have the money or savings always gone to the right recipients? Is there a case for a much more radical redistribution of funds given the emerging inequalities in benefit and the social impact of higher prices for essential goods and services?

I think the Governments handling of furlough and grants to business was incompetent and quite frankly outrageous! There are thousands of cases of new companies incorporated during the height of the pandemic, with one objective, to commit fraud. Yet the Government were happy to hand out funds to these newly formed companies with no trading history and without undertaking the required background checks. These businesses applied for grants, were awarded those grants, but had no intention of repaying those grants.

The Governments fraud teams are investigating cases, but the likelihood of recovering fraudulent claims is slim and those which are successful will take years to recover.

Many people were unable to earn when their businesses were shut down. Unlike normal times they could not simply get another job. So some scheme had to be instituted that allowed them to survive financially. No doubt some organisations took advantage but filtering out those seems difficult in the time available.

Business loans probably fell into the same trap, where insufficient time and effort was available to properly vet and monitor applicants. Those who read Private Eye will see a sweet company behaving in a very dodgy way (issue 1569 p39). I hope (vainly?) that those who conned the government will be brought to justice.

Any ill-gotten gains will percolate back into the economy in due course but that will do nothing to assist people in absolute poverty or fuel poverty. I agree with Malcolm, in the time available, something quick and dirty had to be done to support people’s whose business or occupation had to be closed by order of the state. With hindsight we can see that more stringent checks should have been made for firms without a relevant track record. I am somewhat more hopeful than Wingman that the HMRC will recover much of the misappropriated money; it has numerous levers at its fingertips to require repayment.

In the past there have always been objections to the targeting of benefits according to needs so we have ended up with a number of indiscriminate subsidies [e.g. the winter fuel allowance, and the new £150 council tax rebate for bands A–D properties]. I should have thought with modern digital systems and databases it would have been possible to redress many of the anomalies to ensure a more a more equitable distribution of resources without leading to entitlement fraud. Direct payment of subsidies to energy suppliers might be one way of avoiding misuse of the money.

The problem I see is that subsidies help everyone – rich, poor or in the middle. In an ideal world we could but we do not have unlimited funds. So, in another ideal world, we need to hel0 those who cannot help themselves. But how do we better identify people? Can we give extra help to those those who are householders, but do not earn enough to pay income tax, for example?

Some feel means testing is “intrusive”. In my view, if you want additional state help you need to demonstrate that you are in genuine need. Universal Credit is means tested.

I think it should start with a needs assessment which is then followed up with a means test. This might reveal that some adjustments in lifestyle and personal management could assist in relieving hardship.

The phrase “means test” is considered to be a dirty word in some circles and it has been suggested that it deters genuine claimants from applying for their entitlements, but I believe those days should be behind us now given the wide range of benefits for which a personal statement is required.

“Hitting the poorest hardest”

That is bit of a generalisation. By definition, the very poorest have no assets, and so can lose nothing more as a result of inflation. Tomorrow’s food will be more expensive, but today’s wages or benefits will generally increase at a similar rate. They will still be poor, but no poorer than they were last year. And if they have past debts to clear with an authorised lender, then paradoxically, they are ultimately better able to service those debts in a high inflation world. Let’s not confuse high inflation with high interest rates, although the two do tend to be linked.

Those that are always worst hit by inflation are those that thought they had made provision for their retirement, by building up cash assets and holding them in low risk deposit accounts, including National Savings. If they fell into the trap of paying the married woman’s reduced rate of National Insurance, then they have no pension entitement of their own and are disqualified for some state benefits.

These people already had a dwindling pot of money to live on. It is now emptying faster than ever. They may not be “poor” by convential Millenial thinking, but they will be poor very soon, possibly losing their increasingly unaffordable home too.

Universal Credit was not “cut”. It was temporarily increased during Covid and that temporary increase was subsequently removed.

As Em says this sort of topic can get bedevilled by generalisations, and as John says we (ideally) need a means assessment of individuals to ensure those genuinely in need are helped but money is not wasted on those who don’t.

We are in unusual times, particularly with the Ukraine crisis, and hopefully the current and projected levels of inflation will not last too long.

Average wage is not a sensible measure of the harm of inflation as that, for many, will include a discretionary spending element that will reduce in times of exceptional inflation. Minimum and living wage is the measure that is best used to see the harm that inflation does. The way his has changed can be seen here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/790910/20_years_of_the_National_Minimum_Wage_-_a_history_of_the_UK_minimum_wage_and_its_effects.pdf

We need to be careful to distinguish between price inflation and a rise in costs.

The price of first class postage has risen faster than general inflation, but because of internet facilities the marginal cost of communicating with family and friends has fallen.

Sometimes the rise in prices is associated with betterment of the product; the enhancement might be desirable but actually unnecessary so a cheaper alternative can often be found.

When prices rise too much, demand will be depressed and a correction should occur, although this can manifest itself in withdrawal of the product or service.

With luxury goods, the usual response by manufacturers is to raise prices above the inflation rate year on year so that ‘must have’ [i.e. not essential!] products maintain their premium status and those besotted with the brand will make themselves poorer by continuing to buy them.

Em says: Today 15:23

“Hitting the poorest hardest”
That is bit of a generalisation. By definition, the very poorest have no assets, and so can lose nothing more as a result of inflation.

It’s a bit more complex than that, Em. From Investment Sense:

“An Institute of Fiscal Studies (IFS) report has said that between 2008 and 2010 the poorest 20% of households suffered an average annual inflation rate of 4.3%. In contrast the rate of inflation suffered by the wealthiest 20% was just 2.7%.

The reason for this disparity lies in the different goods and services that we buy. Although there are two main measures of inflation CPI (Consumer Price Index) and RPI (Retail Price Index) we all actually suffer a different rate of inflation.

People on lower incomes spend a greater proportion of their income on gas, electricity, food and fuel, all of which have risen sharply in price. In 2009 for example, the poorest 20% of households spent 9.4% of their incomes on household fuel, the richest 20% spent only 4.4%. “

It is worth noting that, due to the ‘triple lock’, the state retirement pension has been rising ahead of the general rate of inflation for some years now. Unfortunately, I doubt whether much of the excess was saved for the rainy day which is on the latest forecast.

The triple lock formula was suspended last year because the comparison with earnings growth — distorted by a rise in earnings when people on furlough during the pandemic return to full pay — was likely to produce an ‘unaffordable’ increase in potential pension costs. So the rise in average wages was uncoupled from the annual re-rating and, instead, the state pension increase for 2022-2023 will be determined by either the inflation rate or 2.5% whichever is the greater. The triple lock would then be restored for the remainder of this Parliament ending in 2024.

Overall, the triple lock has proved to be a very expensive policy. With the current steep rise in the CPI it will be interesting to see whether the government holds fast to its pledge to revert to a full triple lock; I have seen speculation that it could require an uplift of 10% when the calculation is made in July 2022 for the next fiscal year but if the rate of inflation then declines significantly, as is predicted by some sources, it could blow a hole in the public finances.

Well, that elicited some good fact-based responses! Thank you.

Malcolm’s evidence that average wages is not a good indicator of the impact of inflation on the low paid is bit of an eye-opener for me. It seems that minimum wage legislation is having a positive effect on base earnings, which I am pleased to see.

On the other hand, that increases the wage bill for most retail businesses – supermarkets, fuel forecourts, clothes retailers and, of course, catering. As Ian points out, this is one of the main areas where prices are increasing rapidly, and inflationery pressures are greatest on the low paid.

And as John comments, the triple lock policy is begining to look unsustainable. But as a vehicle to raise state pensions from the disgusting lows of a few years ago, it may have served its purpose for now.

But as I have pointed out a number of times, money paid out by the state has a “half life” of less than 2. In other words, the government soon recovers more than 50% of whatever it hands out (even to pensioners and benefit claimants), as it is subject to VAT and duties, then Income Tax and NI before it ever reaches the hands of the first worker in the supply chain.

Rather than hand out generous furlough and business loans to foreign companies, the Government could have achieved a similar boost to the economy by paying the “anomalous” wage increase that has been factored out of the triple lock for this year. Those wage rises will now be captured in CPI and will be harder to avoid in next year’s pension increase, unless another government economist performs more statistical magic.

It is all a vicious circle and most wage earners have been fortunate to live in a low inflation / low interest world for the last 20 years. Savers have taken a hammering throughout, unless invested in stock markets and riskier assets where poorer savers simply cannot take the chance.

Susan Stockwood says:
21 March 2022

I totally agree with Harry the government must act to ease the cost of living and relook at the way inflation is worked out. The price of champagne is still the same but your basic food costs keep going up how is that right!! Come on government sort it. Enough is enough

When a benefit is proposed and given, the end result is always disappointing. Last Sunday, the chancellor told us that he was spending nine billion pounds to help with rising fuel price rises. That’s a great deal of money, and what does it equate to? £350 per household., hardly a third of the increased cost of fuel and £200 repayable later on. As has been said above, it is difficult to target money to the poorest in society, but the government don’t seem to be trying very hard to do this, with this latest fuel payment. The effective way is to raise the tax thresholds at the bottom end, significantly and lower the upper rates at the other end so more pay extra. This would help those on low incomes, but would, of course, clobber families who earn more and have bigger household bills to pay. They would also be classed as poor. In the end, government handouts are an expensive (for what they give out) way of help. I wonder how expensive it would be to subsidise some basic foods and clothing, or subsidise insulation costs in the longer term. I remember the scheme to insulate lofts. My experience of it was being scammed by a trader who was due to call at my parent’s home, called twice, found a fault each time and went off with two lorry loads of insulate to some unknown destination.

With the energy bill loan of £350 per household, even though it is an indiscriminate subsidy, at least it will be paid back to the government over the five years, but who is to say that will be the end of it or there will not be pressure to maintain it or even waive the repayments because the energy cost spike doesn’t go away? Tinkering with these provisions always seems to have unintended consequences.

There seems to be an assumption that these reliefs are paid from the government’s piggy bank and therefore have no repercussions, but in reality they are all paid with our money and unless there is some form of allocation based on need they have no redistributive effect whatsoever and could actually aggravate relative disadvantage.

We should be able to opt out of the energy bill loan.

Many people just don’t need it.

But there are also many people who try to live within their means and do not want to ‘owe’ money like my parents have never had credit cards and their only debt was their now paid-off mortgage. That £350 will likely ‘disappear’ and they will find they they are paying back money they never wanted in the first place and their budget will have to stretch to cover it.

The £350 mentioned here and elsewhere comprises of a £200 loan which must be paid back over a few years and a £150 council tax rebate for bands A-D homes, which will not be reclaimed.

I hope that recipients of the loan will use it sensibly and make plans to repay it. Like others, I would like to opt-out but that does not seem to be an option.

I doubt many will make plans to repay it. As alfa says it will just disappear in everyday spending.

These handouts should be targeted at those who need them, And why assume all council tax payers in bands up to D are in need? This is just money that should, again be targeted; the money saved would be better spend on social care and mental health, for example.

But we don’t target some benefits responsibly, the annual £2-300 winter fuel payment being a classic example. And the £10 winter bonus.

Governments like to make these grand gestures with public money. And notice how it is always a round sum of money, so it looks better in a press release or sound bite.

Rather like rich Uncle Pennybags handing out £20 notes to his neices and nephews at Christmas, he wants your blessings and support, at least come the next election.

Our council is going to pay the £150 council tax rebate into my bank account from which the direct debit is drawn. I have not seen how the energy loan will be dealt with. What happens when people change supplier, move home, or go into care and there is a portion of the loan still outstanding? This promises to be another administrative fiasco.

Malcolm rightly asks “why assume all council tax payers in bands up to D are in need?. Equally, why assume that those in Band E and above properties might not need such support? There could be many households with three generations, including four+ children, needing a larger home. Others might be living in an inherited house in a wealthy neighbourhood but with no more than an average income. We know an elderly widow who occupies a detached Band E house, however her overall income is modest but she will not be eligible for the rebate.

Across-the-board rules with sharp cut-offs and cliff-edge consequences do not make for social justice. Government’s are frightened of making a proper needs assessment and setting a sensible means test on affordability principles. The alternative leads to blanket policies which actually deliver more inequities than a means test.

Carl says:
21 March 2022

In western democracies the price of food as a proportion of peoples budgets has been falling decades. I am in bottom 10% of income distribution and l am aware that l spend a higher proportion of my income on food than people with higher incomes, but l also spend a much higher proportion than many other people in the same income sector. Conversely l have nil consumption of petrol, tobacco, meat alcohol, recreational drugs or sugar. These things should be in alternative index.
The rise in prices is due to post Covid dislocation of the global market, and a huge rise in fossil fuel , metals, timber, fertiliser and a host other raw materials occasioned by a war initiated by one of the globe’s Great Powers. All these factors are sudden and largely unforeseen. I know by experience that British supermarkets prices are lower than a number of European countries that l have lived in. But supermarkets are at the end of the food chain and must react to input prices.
I think there will be long term changes to energy markets pushing them more Green and conversely a growth in a fossil fuel and fertiliser safety net. But what governments can do is very limited in the short term. Maybe some foods could be subsided rather than increase social benefits , which often don’t get spent how the well intentioned imagine they would be. Bu subsidies also create waste. Dilemmas.

John King says:
21 March 2022

An inflation index based purely on essentials (food,heating, etc) is badly needed. It’s not accurate to include luxury items in an index because many people can’t afford them.

An inflation index is just a number. By itself, it doesn’t make people any richer or poorer.

When I was heavily involved in Business Intelligence / Data Mining / Analytics, I would often get asked to provide information to the various managers who thought they were steering the ship. (Visions of Dwight Schrute in The Office US “Booze Cruise” episode).

If I had a priority conflict, or the request seemed somewhat pointless, my initial response was: “OK, to help me give you the best analysis, what decision is this going to change, or at least influence?” This was often met with a blank stare. I’m sure there is a Dilbert cartoon somewhere … .

Because, if it doesn’t actually change anything, information is valueless. So maybe, a better inflation index is needed, but what will it be used for exactly? Unless it is linked to pay, benefits, savings or prices it means nothing.

Crusader says:
22 March 2022

Isn’t there a way to pay back the £200 loan much quicker? I certainly don’t want to spend five YEARS paying it off whether I want to or not, and I’m fast approaching 60 and I’ve never borrowed money from any institution or used credit to buy anything, and I don’t think I even need the handout anyway.

I expect there are many of us in that situation, Crusader. It really is a ham-fisted approach to the problem. It is designed to show that something is being done rather than actually directing support to where it is most needed. For some people in particular circumstances the £200 might wipe out one year’s electricity bill; for others it will barely touch the sides. And some consumers might even start to be more extravagant with their energy consumption rather than conserving it. Policies made on the run and not thought through are the reasons so many despise politicians . . . but will they ever learn?

If you really feel you would rather not be obligated to accept the £200 government energy rebate/loan, there is a petition you can sign:

https://petition.parliament.uk/petitions/608007

8,934 have already signed. 10,000 signatures are required for government response. 100,000 signatures will be considered for debate in parliament.

The 10,000 signature goal has been reached and surpassed. It is now eligible for government response. It is on course for its next aim for 100,000 signatures to be considered for debate in parliament before the cut off date, which remains at August 8th, 2022.

https://petition.parliament.uk/petitions/608007

The petition data shows the number of ‘signatures’ for each constituency, under the name of the current MP. There is a lot of support against our MPs name.

I feel that if 100,0001 people don’t want a loan that could be easily and economically administered, but if the petition was accepted by the government after a parliamentary debate presumably the option of no loan would have to be offered to every household.

I understand that the £200 loans are due to be issued in October 2022.

Who is funding this? Is it the government, or, because it is essentially self-financing, is the energy industry going to carry the cost and then claim the administration and interest costs back from the government?

This exercise looks like it’s got the student loans system badge of brilliance stamped all over it.

Harry Kind says: “Savers do have to be wary that their cash doesn’t get eaten away by inflation … but it’s unlikely that they face a choice between heating their home or feeding their kids a nutritious meal as many families do.”

The choice for families is straightforward: feed the kids a nutricious meal. Healthy adults can survive in sub-zero temperatures, provided they have sufficient calorific intake to generate body heat and are able to exercise. I can well remember visiting both my grandmothers in the depths of winter, when there was no background heat in their homes. A coal fire was lit in lounge the evening and we would sit and relax for a few hours before settling down in our unheated bedrooms with a hot water bottle.

Central heating systems are a relatively recent innovation in Britain, and it is a mistake to assume that this is essential to wellbeing. Not having the heating on is uncomfortable, but not life-threatening for most people.

As to the elderly not facing a choice, that is often correct as there is no choice to be made. Many elderly are immobile and cannot exercise to raise their body temperature like a healthy child can. And particularly those with diabetes must eat the right types of food regularly to manage correct blood glucose levels. A hypoglycemic attack can also trigger hypothermia which is a particularly dangerous situation in a cold house. For the eldery and particularly those in poor health, poor diet and poor heating can result in death.

That is sound advice, Em.

Strangely, perhaps, it doesn’t seem to be the elderly who are complaining the most about the impending rise in the cost of living. Their lifetime experience makes them more sanguine.

Many households could save money and improve their diet at a stroke by reviewing their choice of foodstuffs, especially outside main meals.

Many could also save money on food and household provisions by switching from branded products to supermarket own-label lines which are often at least as good but cheaper.

Not taking the car for short journeys would also help.

Buy nothing you don’t need and nothing made outside the UK would be my recommendation too.

Don’t hesitate to register with a food bank or community fridge if you are struggling to make ends meet — that’s what they are there for and they save food from being wasted.

Averages are deceptive. Many in their 60s have been earning longer, saving longer, have a property that has outpaced inflation and made them wealthier (on paper). I would have been surprised if the figures were very different.

More sanguine? I, like many, have been through difficult times financially. Remember the 70s, record inflation, house prices spiralling…… We have direct experience of hardship, going back to the years following the conclusion of WW2.

Buying from outside the UK is beneficial to an individual’s spending. However it is not necessarily beneficial to the “greater good”. Supporting UK business provides employment, keeps currency within the UK, provides various revenues to the Treasury – income tax, NI, corporation tax, vat – and to local economies, so , providing UK industry is up for it, is probably beneficial to us all.

To prevent hypothermia in the elderly, a solution that I have been advocating for some time is now a distinct possibility. I would however, prefer Which? to examine the efficacy and safety of this type of battery powered clothing before I would feel at ease and comfortable wearing it.

https://www.activheat.com/category-s/716.htm

I agree it would be good to have such products tested for safety and efficacy. I feel there’s more than a touch of Wallace & Gromit about the heated clothing concept.

Before universal central heating, Damart clothing and textiles were a popular source of comfort and warmth. I think they are just another clothing brand now.

Layers of natural fibres should provide the sort of benefit an electric vest would deliver but those with little movement might appreciate the reliability of a powered garment.

In olden days ( I’m told) when winter was about to begin you covered most of your abdomen with animal fat and wrapped yourself in layers of cloth. Come the spring you then discarded this and had a wash. That is probably when your social life restarted.

As well as inflation indices it would be interesting to see what, for a typical household, the actual costs of essentials and basics were each year, such as essential food, electricity, gas, water, basic clothing, public transport, council tax, tv licence, ……. I don’t know whether we would include housing, as some will be covered by housing benefit, subsidised rent, while others will pay a mortgage. The cost could then be related to the state pension, benefits and income for those at the lower end of the wealth scale.

Although many seem to heat their homes more than necessary, inadequate heating can be detrimental to health for a variety of reasons: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/770963/data_sources_to_support_local_services_tackling_health_risks_of_cold_homes.pdf

In the 21st century it is sad that some people are unable to afford to heat their homes adequately.

Fortunately we are entering the season of warmer weather. Let’s hope we see some light at the end of the tunnel before we go back to the colder season. A “breathing space”.

@hkind
Harry, how is poverty defined?

Why choose that family, which I doubt is the norm? Why not a couple with a child?

@hkind, thanks Harry. Is any information given on how these incomes are capable of sustaining a basic existence? If they include housing they would be very different depending upon your location. Or is it assumed all in poverty will receive housing benefit?

There are so many factors in considering poverty levels and the cost of living that no measure is entirely satisfactory, and that’s before you even get into the territory of relative poverty.

Although direct housing costs might be excluded from the assessments of need, many have housing maintenance costs that others do not. In Norwich, the like-for-like rents for council housing are around 40% of those in the private sector, but the poorest households do not necessarily enjoy the lowest rents. Council Tax Reduction [up to 100%] also needs to be taken into consideration. Inevitably, policies have to have an element of one-size-fits-all in order to be basically workable. Regional differences are a strong factor in the UK.

Only a totalitarian state could manage these situations equitably [but they don’t necessarily do so!].

Vynor Hill says:
24 March 2022

The definition of poverty should not be just financial. Any household that has to consider the often discussed definition of heating or eating (simplified economics that can be extrapolated to other basic choices in clothing, transport and living conditions) is in poverty what ever the income. In a fair society, no one should be in that situation unless they have mismanaged things and need help making better choices. That is a social problem and not necessarily a financial one. We are all looking to improve our standard of living, it is a natural desire to have a bit more to cope with inflation, mortgages and low savings rates. The so-called levelling up agenda has to address poverty as well as balancing the industrial and general wealth divide North and South. So many of the financial measures used by government make life worse for those who need the basics to live. Traditional politics need less dogma and more common sense which ever party is in power. We shouldn’t be discussing poverty in our society, or increasing the need for food banks. We do so because there is a problem which needs sorting out.

Icon trouble again -my fault. It is me.

Mr Breandan Butler says:
30 March 2022

Harry KInd and also Jack Monroe make excellent points but this subject is neglected and it would be good if WHICH? did more reporting on this. I would say supermarkets are deliberately avoiding stocking own brand more cheaper options and so are deliberating profiteering . The BRC British Retail Consortium has recently said retailers “were able to limit price rises on many essential goods” and “by keeping the price of key items down and expanding value ranges” . This however is not the reality I see in many supermarkets. Many supermarkets have reduced the range and availability of own brand items. There are also another number of practices that are expanding such as not pricing items on shelves and showing an incorrect lower price on the shelves to that charged for. This leads to customers often being overcharged. Although not illegal to charge a different price from that displayed this practice has expanded in my experience and although supermarkets will usually correct the price charged if it is pointed out I have experienced being told if you don’t want it leave it , or being told by the member of staff they are too busy to check or wrongly being told I am mistaken and have looked in the wrong place.

Crusader says:
3 April 2022

I’ve lived without central heating, or ANY heating in most of my home for well over 35 YEARS, more than half a lifetime, only now am I installing heating throughout the house, but it keeps getting held up by various appalling problems which I’m struggling to overcome, like repeated attacks of wretched timber destroying fungus in the space under my lounge floor, so I’m having to deal with that before I can continue and complete fitting my heating. And I know what poverty is like as back in the 80’s when I first moved in on my own I was on the dole for years on a mere £37 a week as I couldn’t find any work because of various appalling disorders but at least back then I could do limited work unlike now, and I ended up lifting heavy railway lines from a local rail served coal yard which had closed down, and we didn’t have any machines to start with either, it was real man’s work, just like the Victorian navvies would’ve done. And of course I often had to go without food for several days at a time so I could pay my bills. And luckily I could do lots of “foreigners” like repairing old TV sets and audio etc. as well as repairing various equipment for a local band and some of their friends. And that wouldn’t be possible now with today’s tech. And there was no food banks then either, but instead a prime minister who was more like a ruthless dictator who closed down loads of big industries and put millions on the dole and starved a good many children and then started charging extortionate taxes for local services and forced a good many into homelessness and appalling destitution, and then she squandered countless millions of pounds of taxpayer’s funds on fancy expensive advertising to sell off the various utilities, and then even far worse, she then started offering an absolutely OBSCENE 50% rise in salaries to those who absolutely LEAST needed it, the top civil servants who were already on top money, and it was so obscene that most of them refused it. And then as a final super rip-off she also charged the nation’s tax payers for her own lavish state funeral! So I think today’s younger generations who weren’t born then still have a lot to be thankful for, even those living on benefits.