Inflation is at its highest for nearly 30 years. According to the Office for National Statistics (ONS), inflation reached 5.4% in December, a figure not seen since March 1992. As bad as this snapshot may seem, it does not reflect the difficulties facing the low-income households. Families choosing between eating and heating, or going to their local food bank, will feel the 5.4% figure is ridiculously low. The metrics we choose to use to track our rising day-to-day costs, and whether the resulting figure is a useful marker, are important.
The main measure of inflation used by the ONS is the Consumer Price Index (CPI). The CPI examines the weighted average of the prices of a theoretical basket of consumer goods and services. It calculates the average price increase of 700 of these items across 120,000 outlets. Unfortunately, like any average, it means nothing to a specific person. More than that, however, it includes some some pretty weird stuff for those at the far end of the economic spectrum: the cost of a trailer, television, champagne, acoustic guitar, flower vase and bicycle helmet are all included, per example.
Like activist Jack Monroe argued, it’s a “brutal and darkly comical tool” for measuring inflation in a country where 2.5 million people have used a food bank in the past year. People spend a different proportion of their available cash on different types of products – and that impacts the price bumps a person sees. If you spend half your disposable income on food, which has grown at a faster rate than other items, the inflation you experience will be well above the basket-wide average of 5.4%, including luxury items like a flower vase. .
This average is therefore useless to really measure how much the poorest people are struggling in the face of rapidly rising prices. For people with very little “disposable” income, the rising prices of non-discretionary items like food and fuel are much more felt. When the cost of theater tickets or a restaurant meal increases, these are luxuries people can afford to give up. This is not the case with your essentials. The average is useful as a measure for economists studying national trends. More useful for tracking the economic health of hedge funds than low-income households.
Fortunately, after Monroe spent a decade writing and campaigning on this issue, the ONS announced last week that he will change his way of looking at inflation. The body will still release the monthly CPI measure, but it said it will also produce more detailed “experimental statistics” reflecting the different proportion of income people spend on different items, such as gas and oil. electricity or gasoline if you go to work, for example. Tweeter after the announcement, Monroe said the change “has the potential to trigger an avalanche of change”.
write in The Observer last week she explained that she was working with a team of economists, charity workers, analysts and former ONS staff to compile a new index: ‘One that will document the disappearance of lines budgets and the insidiously creeping prices of the most basic versions of supermarket essentials. At the very least, it will serve as an irrefutable snapshot of the reality experienced by millions. At best, it may be a wake-up call. for retailers who keep their £7.50 ready meals and £6 bottles of wine at £7.50 and £6 for a decade, while quadrupling the price of basic bouillon cubes and broken irregular grains of White rice. .”
This is undoubtedly a positive change. Commentators with a much better economic pedigree than me – including the chief executive of the Resolution Foundation Torsten Bell, for example – have said so. And for members of the labor movement, the move to a finer measure of inflation, better reflecting the burden on the most vulnerable households, should reinforce calls for much-needed change from unions, MPs, charity workers, local authorities. government figures and celebrities, including Marcus Rashford: to make it a legal right for people to have access to food.
As much as Rashford’s campaign should be praised, ensuring starving children are fed should be something protected by law. The government shouldn’t have to be publicly shamed to make sure workers can afford the bare necessities. But we have to face reality. After a decade of conservative policies, the poverty rate among working households reached a record this century to 17.4% last year. And the government is showing no signs of deviating from its attack on the poorest – as betrayed by the £20-a-week cut in Universal Credit last year and the planned rise in National Insurance contributions in April. As we now face rapid inflation and the battle to shed light on the hardships facing the most vulnerable continues, the change announced by the ONS should be welcomed. Anything to help hold up the mirror.
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