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UK shop price inflation slows to 1 per cent in July

Lowest rise in food inflation since 2010.

Overall shop price inflation in the UK slowed to 1 per cent in July from 1.1 per cent in June, according to figures released today by the British Retail Consortium (BRC) and Nielsen.

Food inflation fell to 3.1 per cent in July from 3.5 per cent the previous month, marking the lowest rise since 2010. Deflation in non-food items was unchanged at 0.3 per cent in July.

Stephen Robertson, director-general of BRC, said:

A two-year low for food inflation is good news for hard-pressed households still suffering falls in disposable incomes. Lower shop price inflation is helping to narrow the gap between living costs and wage increases.

Extra promotions, particularly linked to party food and this summer's big events, are combining with past falls in commodity prices, which are working their way through to shop prices.

But the relief may not last. Poor harvests, especially of corn and wheat in the US, are creating a build-up of inflationary pressure. Animal feed has risen sharply in recent months and is likely to affect prices for things like meat, poultry and eggs.

Overall, non-food goods were cheaper than a year ago for a sixth month as retailers discounted to generate sales. Great news for customers who have spare money to spend on clothing, electricals and furniture. But many don't have money available or the confidence to spend even with prices down.

Mike Watkins, senior manager of retailer services at Nielsen, said:

Over the last few months, we have seen difficult trading conditions due to the unseasonable weather. In food, promotions remain close to an all-time high and the focus on price cuts and the use of vouchers or coupons continues as consumer demand is unpredictable.

So, shoppers are seeing a double benefit as external cost price pressures have also eased a little which contributed to a further slowing in shop price inflation in July. Once back from their summer holidays, we expect consumers to still be cautious about big ticket or discretionary spend, which is why there is no upward pressure on non-food prices at the moment.

The BRC-Nielsen shop price index is a monthly measure of UK shop price inflation. It measures changes in the price of 500 of the most commonly bought items.

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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.