In September price rises in the UK dipped ever so slightly, meaning according to the Consumer Prices Index, that the cost of living rose by 3.1%, as opposed to 3.2% in August.
That isn’t the most exciting of lines with which to start an article, it is a devastatingly important one for a lot of people.
The rise in the cost of living comes in the wake of warnings from the Bank of England that it may need to act as inflation, the spook that haunted the economy throughout the seventies, starts to rise.
Figures from the Office for National Statistics (ONS) show that a range of factors have driven the rise in the cost of living, including costs for housing and transport. The rise has been kept down by the absence of the government backed ‘Eat out to Help Out’ scheme which saw prices in pubs and restaurants rise in the summer of 2020.
However, as Mark Hardie, head of prices at the ONS told the BBC this has been offset by "the costs of goods produced by factories rose again, with metals and machinery showing a notable price rise. Road freight costs for UK businesses also continued to rise across the summer."
Inflation is the rate at which prices rise and can be applied to both goods and services, individual small rises in inflation may not be immediately noticeable, but over the long term they can have an impact on how easy it is for businesses and households to manage their budget.
The cost of living is rising due to a worldwide rise in demand for oil and gas pushing up prices, shortages and bottlenecks in the supply chain are also having an impact. Withdrawal of government support given to businesses during the pandemic and increased labour costs are also significant factors.
Governor of the Bank of England Andrew Bailey has warned that the bank will have to act as the UK’s inflation rate looks set to surpass 4% before falling back as the economy recovers from the pandemic.
If inflation continues to rise the Bank of England will try to stop it by raising interest rates, currently at a historically low rate of 0.1%. This will see the cost of paying back mortgages and other loans increase.
He told the BBC "Monetary policy cannot solve supply-side problems - but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations."
Any decision as to what form action will take will be made by the bank’s Monetary Policy Committee at its next meeting on 4th November.
In 2019/20 there were 14.5 million people living in poverty in the UK, 4.3 million of whom were children. Poverty hits particular groups in society hardest including families living in rented social housing (46%) and private renters (33%), 40% of families where both adults are out of work were found to be living in poverty, 11% of families in poverty had at least one adult in full time work.
The sheer scale of poverty in the UK, one of the world’s wealthiest countries, means that even a small rise in the cost of living combines with government policies like the removal of the £20 uplift to Universal Credit could tip them into destitution.
Action by the Bank of England to raise interest rates might tame the beast of inflation, but it will do nothing to help individuals and families who are already struggling to get by. It might, in fact, make things a whole lot worse for them.
An example of this can be seen in my home city of Stoke-on-Trent where over the autumn half-term holiday the city council will be spending part of a £2.6 million grant from the government to support families struggling to feed their children during the holidays. Part of the money will also be used to help struggling households pay their heating costs this winter.
The fact that so many people in a wealthy developed country are walking a tightrope between one pay packet and the next is the symptom of something having gone seriously wrong with our society and economy.
Poverty is deadly, if experienced in childhood it can impact an individual’s physical and mental health in ways that last a lifetime. It crushes people’s aspirations in a iron vice of despair, when, as it all too often does, poverty tips over into destitution it can leave them too exhausted to do more than just survive.
Inflation needs to be brought under control, but Bank of England governor Andrew Bailey is right when he says monetary policy alone will not save the day. We need an economy and a social contract that works for people, particularly families, as much as it does for big business.
Until that happens the ‘high wage, high productivity’ economy the Prime Minister spoke so confidently about at the Conservative Party conference last week will be just another pipe dream, only to be found on the sunlit uplands of his increasingly misplaced self-confidence.