How the poor have been hit hardest by inflation

New data shows that the cost of essentials such as food and energy has increased most rapidly over the last five years.

It’s hardly news that the incomes of poorer families have been squeezed until the pips squeak. Declining real wages, underemployment and cuts to social security have all combined to drive down the living standards of those at the bottom of the income distribution in recent years. But low-incomes families have had to contend with another downward pressure that until yesterday we may have intuited, but hadn’t yet seen fully evidenced.

Now we know for sure that poorer families have experienced higher levels of inflation than the better off and, indeed, the average, since the recession began. Analysis published yesterday by the Institute for Fiscal Studies ably demonstrates this by taking the price rises of various goods in recent years and then putting these together with information about which items are more or less readily consumed by different income groups.

Unsurprisingly, it shows that the cost of essentials such as food and energy have increased rapidly over the last five years (at about 30 per cent and just under 60 per cent respectively). The same is true for others key goods such as transport and education, while the costs of some items such as mortgage interest payments have drifted steadily downwards over the same period.

Since a lower income family’s consumption basket is full of the basics, these trends have hit the poorest hard. In fact, the IFS estimates that those on lower incomes have experienced average price rises that are 7.1 per cent higher than those of the top income quintile since 2007/8. As a result, poorer families’ living standards have been depressed more than accounts that use an average inflation figure might suggest. Likewise, the squeeze on those in higher income brackets is overstated by the standard methodology.

In fact, this exercise still doesn’t give us a full picture of how low-income families are being pinched hard by prices. As the IFS makes clear, its analysis does not capture the way that the same good can cost more or less for different types of consumers – the "poverty premium" effect well documented in a report last year from the Joseph Rowntree Foundation. Poorer families are doubly disadvantaged then: the items they consume in quantity have gone up in price quicker than other goods in recent years, and they often have to pay more than their better off peers for these basics too.

But what are the political implications of all this? For a start, this new analysis undermines the claim that poorer groups have had an easier ride than others during the recession because benefits – a largish part of their incomes – lost less of their real value than earnings. And looking forward, it shows the government is significantly underplaying the impact on poorer households of its 2012 decision to uprate most key benefits at a sub-inflation 1 per cent for three years.

All in all, if you are poor, the cost of living conversation just acquired a new and sharper edge.  

A boy walks through the Heygate Estate in the Walworth area on April 24, 2013 in London. Photograph: Getty Images.

Lindsay Judge is senior policy and research officer for the Child Poverty Action Group.

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Cabinet audit: what does the appointment of Andrea Leadsom as Environment Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for Environment, Food and Rural Affairs.

A little over a week into Andrea Leadsom’s new role as Secretary of State for Environment, Food and Rural Affairs (Defra), and senior industry figures are already questioning her credentials. A growing list of campaigners have called for her resignation, and even the Cabinet Office implied that her department's responsibilities will be downgraded.

So far, so bad.

The appointment would appear to be something of a consolation prize, coming just days after Leadsom pulled out of the Conservative leadership race and allowed Theresa May to enter No 10 unopposed.

Yet while Leadsom may have been able to twist the truth on her CV in the City, no amount of tampering will improve the agriculture-related side to her record: one barely exists. In fact, recent statements made on the subject have only added to her reputation for vacuous opinion: “It would make so much more sense if those with the big fields do the sheep, and those with the hill farms do the butterflies,” she told an audience assembled for a referendum debate. No matter the livelihoods of thousands of the UK’s hilltop sheep farmers, then? No need for butterflies outside of national parks?

Normally such a lack of experience is unsurprising. The department has gained a reputation as something of a ministerial backwater; a useful place to send problematic colleagues for some sobering time-out.

But these are not normal times.

As Brexit negotiations unfold, Defra will be central to establishing new, domestic policies for UK food and farming; sectors worth around £108bn to the economy and responsible for employing one in eight of the population.

In this context, Leadsom’s appointment seems, at best, a misguided attempt to make the architects of Brexit either live up to their promises or be seen to fail in the attempt.

At worst, May might actually think she is a good fit for the job. Leadsom’s one, water-tight credential – her commitment to opposing restraints on industry – certainly has its upsides for a Prime Minister in need of an alternative to the EU’s Common Agricultural Policy (CAP); a policy responsible for around 40 per cent the entire EU budget.

Why not leave such a daunting task in the hands of someone with an instinct for “abolishing” subsidies  thus freeing up money to spend elsewhere?

As with most things to do with the EU, CAP has some major cons and some equally compelling pros. Take the fact that 80 per cent of CAP aid is paid out to the richest 25 per cent of farmers (most of whom are either landed gentry or vast, industrialised, mega-farmers). But then offset this against the provision of vital lifelines for some of the UK’s most conscientious, local and insecure of food producers.

The NFU told the New Statesman that there are many issues in need of urgent attention; from an improved Basic Payment Scheme, to guarantees for agri-environment funding, and a commitment to the 25-year TB eradication strategy. But that they also hope, above all, “that Mrs Leadsom will champion British food and farming. Our industry has a great story to tell”.

The construction of a new domestic agricultural policy is a once-in-a-generation opportunity for Britain to truly decide where its priorities for food and environment lie, as well as to which kind of farmers (as well as which countries) it wants to delegate their delivery.

In the context of so much uncertainty and such great opportunity, Leadsom has a tough job ahead of her. And no amount of “speaking as a mother” will change that.

India Bourke is the New Statesman's editorial assistant.