When energy bills were forecast to soar last September, consumer champion Martin Lewis warned that for some families it would mean a “devastating choice between heating and eating”.
For those on low incomes, that choice has since been made worse by a drop in wages in real terms, with the latest labour market statistics showing a 1.2 per cent fall on average in December.
Although unemployment fell too, rising inflation has prompted the Resolution Foundation think tank to warn that 2022 could herald the worst squeeze on wages since the 1991 recession. (Update: on Wednesday, inflation went up to a 30-year high of 5.5 per cent)
The “heating or eating choice” is made even more difficult by rising food prices, plus the fact that those on low incomes spend a higher proportion of their earnings on their weekly grocery shop and on energy.
But amid the gloom, there is one bright ray of sunshine, and that sunshine is Jack Monroe. The food campaigner, writer and cook managed to persuade Asda to slash the costs of some basic food items like pasta, and to restore their “value” range across all stores.
Monroe had gone viral last month after highlighting how the prices had soared on some products in her local supermarket in Essex (the price of a bag of rice went up 344 per cent). Value ranges had been withdrawn too.
Yet Asda has now listened, dropping some product prices to previous levels and restoring its budget lines to all of its 581 stores. Monroe, who cried when she saw the swift change, knows whereof she speaks because as a single mother she used to watch every penny when she was on a low income.
Along with economists, charities and statistical experts, Monroe is working on a new price index to measure the cost of basic foodstuffs. While keen to act on the current emergency in living standards for the poorest, she has her eyes on the long-term change such an index would secure.
Yet the speed of her victory with Asda, and the way she praised the company for its “absolutely remarkable” response, was a model in how to use consumer and online pressure to effect real change.
Supermarket giants can’t hold off passing inflation onto some customers, but they do have the economies of scale to protect the least well off – while protecting their reputation for providing value for money in a competitive market.
As a result, Monroe has arguably done more in a week to ease the cost of living than many politicians have done through this entire winter. That ought to perhaps shame some of them into doing more themselves.
Using the power of a big online presence, as Monroe, Marcus Rashford and Lewis have proven, can be highly effective. Using the power of government to fix the underlying causes of the earnings squeeze and wider poverty is more complex. But it’s no less necessary.
The best way to increase wages without pushing up inflation is to boost productivity in areas outside London. That in turn requires a major focus on skills and training, a credible industrial strategy and serious Treasury cash to turn “levelling up” into a reality.
One man who has the power to directly influence each of those, as well as living standards more broadly, is of course the Chancellor.
Rishi Sunak knows that, away from Partygate and the apparently receding Covid pandemic, the cost of living crisis is the biggest political challenge facing the Government. With inflation projected to increase yet further this year, the pain in our pockets has only just started.
Detailed focus group research in the “Red Wall” areas of Yorkshire and Humberside, released this week by the UK in a Changing Europe think tank, found that even last September voters were already worried about rising costs.
“It seems to be costing more each month just to live, just to do your shopping, just to maintain your house,” one participant said. “Food’s gone up, petrol’s gone up, gas and electricity are going to soar through the roof, so how do you make ends meet if our wages aren’t going up?” asked another.
However, Sunak’s big new policy this month to help with soaring energy bills appears to have been greeted not with fanfare but with a shrug of the shoulders or, worse, derision and even fear. His main aim appeared to be to keep the bill down for the Treasury, not the consumer.
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The first difficulty is his £150 council tax rebate will miss lots of low earners who live in homes in higher council tax bands. More worrying though is that the so-called “Energy Bills Rebate” is in fact a forced loan that knocks £200 off bills this year but has to be repaid over five years in £40 installments.
Add in the fact that the new system only kicks in from October, and bills in April are due to go up for 22 million households by £693, and it’s easy to see why even some Tory MPs worry the Sunak policy won’t even touch the sides of the problem.
One poll, from price comparison site Choose, found that 49 per cent of people worry they will struggle to repay the £200 loan. Some 34 per cent would rather opt-out and not be given the loan at all. Anecdotally, a similar message has been fed back to MPs via their postbags and surgeries.
Some who already have bad credit ratings don’t want the loan at all, some have a natural working class fear of debt. There’s no small irony in a Chancellor whose political philosophy is to cut the nation’s debt level actually been seen to force it on individuals.
There is a simpler way of providing more immediate help to the poorest, and that’s through a grant paid in April through Universal Credit.
A new Citizen’s Advice briefing sent to MPs recommends exactly that, along with a six per cent increase in benefits to reflect April’s likely inflation rate (as opposed to the 3.1 per cent they were pegged to from last September).
If Sunak hadn’t withdrawn the £20 a week pandemic uplift in Universal Credit last autumn, many families would be in a stronger position to withstand some of the coming price shock.
A shock it will be, but not a surprise for many. Which brings us back to Jack Monroe and the way she has put a human face on the misery of price rises.
“I’ve cried in supermarkets plenty in the last 10 years,” she said. “Putting back jam that had crept up by sixpence, meaning [my son] and I faced a week of bone dry toast. Trying to work out what to put back, what to do without.”
Margaret Thatcher, who famously made her name with her “household shopping basket” economics, knew that every penny counts to millions of people. Sunak and Boris Johnson may call themselves admirers of Thatcher, but on the real-world perils of inflation they’ve yet to prove it.