Inflation Hits a 41Year High in UK, Parents Struggle to Buy Food

According to a poll conducted by the country’s statistics office, more than a quarter of single parent homes in the UK have lately ran out of food and are unable to afford more, highlighting the impact of rising prices.

Between February 8 and May 1, over 15,000 homes were polled, and 5% indicated they had ran out of food in the preceding two weeks and were unable to buy more, rising to 28% for households with a single parent and at least one child.

In October 2022, consumer price inflation reached a 41-year high of 11.1%, while food price inflation reached a 41-year high of more than 19% in March.

Although British supermarkets claim that prices are starting to fall, records from the British Retail Consortium trade organisation reveal that prices in June were still about 15% higher than a year ago.

On Wednesday, the Office for National Statistics will publish June inflation numbers.

In April, Britain’s main welfare benefits increased by 10.1%, while the government gave additional assistance for energy expenses.

Despite this, 21% of assistance claimants reported running out of money for food, according to the Office for National Statistics.

Larger families face the most strain, as support payments have been capped to a maximum of two children per household since 2017, with few exceptions.

According to the ONS poll, those who rent their homes are often under more financial stress than homeowners with mortgages. Renters reported that it was extremely or very difficult to afford their rent, compared to 28% of mortgage holders.

Interest rates at the Bank of England have risen to 5% from 0.1% in December 2021 and are anticipated to rise further, forcing the government to ask lenders to give mortgage holders in arrears up to a year before repossessing their houses.

Tenants who fail to make rent payments usually have less time before being evicted. Some small landlords are also selling or boosting rents in reaction to rising mortgage rates and more industry regulation.

High UK inflation will not help public finances

High inflation will not benefit Britain’s public finances as much as in the past since government debt is now more sensitive to fluctuations in interest rates and prices, according to the chair of the Office for Budget Responsibility on Friday.

According to Richard Hughes, previous concepts of being able to inflate away enormous levels of public debt no longer apply.

According to Hughes, the average effective duration of British government debt has decreased from about seven years in 2008 to two years, implying that higher interest rates are now feeding into the cost of government debt faster than in the past.

This is largely due to the Bank of England’s quantitative easing strategy, which effectively replaced longer-term government bonds with relatively short-term central bank reserves that are directly linked to the Bank Rate.

Second, over a quarter of Britain’s government bond stock is linked to inflation – by far the greatest amount among major advanced nations – implying that the government is increasingly compensating investors as consumer prices rise.

“What this means is that inflationary pressures do not help our country’s public finances in the way they used to,” OBR Chair Hughes explained.

“So higher interest rates, higher inflation, hit the public finances much more quickly, and mean that we start feeling the burden of as the interest rate rises much more immediately.”

At 8.7% in June, Britain had the highest rate of consumer price inflation among major advanced nations.

“What we’re seeing recently is inflationary pressures becoming more embedded in the economy,” Hughes explained.

Inflation in the United Kingdom hit historic highs in the mid-1970s and stayed high for most of the 1980s. During that time, the headline measure of public sector net debt as a share of economic production declined from roughly 49% to 22% in the early 1990s.