How UK food bank usage increases are being driven by inflation and falling real wages

The economic situation in the UK is one where some are doing well but some are being left behind. This is not quite the 0.1% versus the 99.9% debate as the 0.1% do drag some of the population with them. But we are regularly reminded these days that there are sectors of our economy and population are being left very much behind. Today’s reminder has come from the release of news about food bank usage in the UK.

Food banks in the UK

The Guardian newspaper is reporting this today.

The Trussell Trust charity said 355,000 people received food parcels from its food banks between April and September – more than the entire number given out during the whole of last year.

The numbers looked familiar and I double-checked to make sure that the same news was not being recycled. I found my post from the 25th of April of this year.

The Trussell Trust which is the largest provider of food banks says that the number of people it is helping with free food has nearly trebled over the past year to 350,000.

As you can see the numbers are similar but the timescale in which thay have been achieved has shortened considerably. Since April the rate of food bank provision has just over doubled and to be frank I found it both troubling and disturbing then. The Trussell Trust put it like this back then.

We’re seeing people from all kinds of backgrounds turning to food banks: working people coming in on their lunch-breaks, mums who are going hungry to feed their children, people whose benefits have been delayed and people who are struggling to find enough work.

What has changed since?

According to both anecdotal reports (h/t @econhedge) and the numbers reported by the Guardian we are seeing an extra 50,000 people applying due to benefit changes and an extra 80,000 due to delayed benefit payments. Or to put it another way food banks have become part of the institution of the UK welfare state.

If you are thinking what is being done with my taxes then that makes at least two of us!?

If we look internationally then we see the same theme and trend at play in the United States were the food stamp programme now applies to some 47.6 million people. In itself it is shocking enough that the world’s most powerful economy has one in six people on food stamps. However the latest crisis has added another frisson as I could not get the numbers from the USDA as it is part of the current online shutdown. Those who found that the system failed on Saturday will of course be worried about what may happen next to them as the debt ceiling shutdown continues.

With apologies to the Danes the famous quote in the play about their mythical Prince seems rather appropriate at this point.

Marcellus:
Something is rotten in the state of Denmark.

The Shakespearian inspired image of a fish rotting from the head down seems to fit these times as well as when he wrote it. Tucked in there is an explanation of both his genius and the meaning and nature of what it is to be human. Many times I review events this days and find that they invoke such thoughts as described here from the same play.

Francisco:

And I am sick at heart.

The current situation has both tactical and strategic elements. The tactical one relates to benefit changes and perhaps some (shamefully) gaming the system. The strategic one is of increasing deprivation and poverty combined with government apparently shifting some of its role to the charity sector. When I see it doing that and simultaneously promising to give more in foreign aid it is hard not to wonder if some political grandstanding is at play. Do not misunderstand me we have a proud record of helping those around the world in distress but our attitude at home seems to becoming at odds with this.

The effect of inflation

It was only yesterday that I observed around the media a large amount of ennui about the inflation numbers. Nobody actually shouted “boring” but you get the idea. However let me link them to the people above struggling with feeding themselves. Should they be customers of Scottish and Southern Energy how will they pay the 8.2% price rise it announced only last week? If they get food,can they cook it?

If we look directly at food prices we see that even the British Retail Consortium which each month does its best to tell us that there is no inflation thinks that food prices are rising at an annual rate of 2.9%. Tucked away in yesterday’s inflation report was this and the emphasis is mine.

Over the last five years, the three main contributors to the 12-month inflation rate have been food & non-alcoholic beverages; housing, water, electricity, gas & other fuels; and transport (including motor fuels). Combined, these three sectors have, on average, accounted for over half of the 12-month inflation rate each month.

These are essentials, or in central banker speak non-core items, which are rising in price which affects the poorest the most. So here is a driver of the food bank situation described above. Or to put it another way according to the Office for National Statistics food inflation is running at 4.8%, energy inflation is running at 7.7% and water price inflation is running at 4.4% . Still never mind as Audio-visual equipment and related products (think i-pads) are falling at an annual rate of 5.2%!

Wage growth is another problem

I have established a theme that wage growth is falling in the UK and this is continuing as we have discovered only this morning.

Between June to August 2012 and June to August 2013 total pay rose by 0.7% and regular pay rose by 0.8%.

It is clear now that the apparent improvement in the spring was inspired by the fall in the higher rate of income tax and the trend is down. So far the UK’s mini-boom does not appear to have helped much and in fact as we are now winning at international football we may be asking ourselves if we are turning into Germany?! I guess it makes a change from wondering if we are turning Japanese…..

The problem that is real wages

The numbers above mean that UK real wages are falling at an annual rate of 2% if you use the Consumer Price Index and 2.5% if you use the Retail Price Index. As we are reminded of another driver of the foodbank situation I would like to repeat on here part of an article I wrote in today’s City AM newspaper.

According to the latest data for the year to July, UK wages are rising at an annual rate of 1.1 per cent. This is much lower that what used to be regarded as normal. If we now factor in annual inflation, announced yesterday as 2.7 per cent on the consumer price index, and 3.2 per cent on the retail price index, it is clear that real wages are falling at an annual rate of around 2 per cent. The danger of loose monetary policy is that it feeds inflation and worsens the situation for real wages.

We now know that the situation is even worse than I thought and that real wages are falling even more quickly. If we put to one side for a moment that this is a way that loose monetary policy can have a contractionary impact on an economy (sorry to students who need to tear yet another page of our their textbooks) it does not need much imagination to  realise that such a contractionary effect is likely to be most harshly applied to those who are deprived economically.

As they lack wage bargaining power then their wage situation is likely to be weaker than average and as they consume relatively more essentials they find that they are being hit by faster rates of inflation too in a toxic unpleasant mix. Or as Seasick Steve put it.

I can’t lose what I never had

You can’t take what I ain’t got……..

Cause I started out with nothing and I’ve still got most of it left

Comment

There is much to consider in recent economic events. The question screaming from today’s news about food banks is how this can combine with a mini-boom? Sadly in the modern era such contradictions are all too prevalent although Shakespeare’s work reminds us that they are parts of human nature. However the never ending struggle between ourselves and what the film Return to the Forbidden Planet described as “monsters of the id” seems to be one we are on the back foot in.

Looking at the wages numbers I tweeted this earlier

In the future will we all be treated like interns?

One reply pointed out that the old term was Serf! An even older one is Plebian a word which can apparently get all sorts of people into a lot of trouble….

 

 

 

 

 

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  • Edward Harkins

    IT is commendable and very timely that you begin with, “The economic situation in the UK is one where some are doing well but some are being left behind.”

    I’m participating in some of the events in Glasgow this week to mark Campaign Against Poverty Week 2013 – twitter: #CPW13 There has been a constant theme of ‘whose recovery’ and who is/will benefit from the so-called economic recovery in the UK.

    Oxfam Scotland has also produced some excellent research in the theme in ‘Whose Economy’.

  • anteos

    Hi Shaun

    Interesting article. This is the continued side effect of the government trying to inflate its way out of debt, and supporting the housing market via ZIRP.

    However, I’m not so sure that the increase of foodbank usage is a reliable economic indicator. Without being horrible, if food is being given away, then people will use it. Also if its a case of heating or food, then foodbank usage would be cyclical. As people didn’t heat their homes in the summer, then foodbank usage would decrease, as more money would be available for food?

    I am reminded of the beeb program, where the mother got into her people carrier to go to the foodbank.

    The people who are really culpable are the boe. For years they’ve ignored their remit, and this is the end result. A lower standard of living for all.

  • Anonymous

    Obviously the figures you’re using Shaun are the “official” statistics. The reality is of course much, much worse.

  • JW

    Hi Shaun
    I suspect that the 0,1% directly drag the 0,9% with them , as they are their lackeys. Indirectly this 1% to a lesser extent drags another 9% along as ‘getting better’ albeit in real terms they are probably just keeping level. The bottom 30-40% are probably as poor as they always have been, however they are finding the ‘essentials’ harder to get, but ‘gadgets’ easier.And as you report today the State is offloading its responsibility to others. The so-called ‘squeezed middle’, 50% or so, are beginning to slowly realise that the years of debt driven ‘growth’ in living standards is an illusion. So far the constant media ‘double think’ has helped to reinforce the drugs of modern life, TV, footy, cheap flights etc , so in general they still believe that its all temporary and things will ‘get better’ again.

    But the stark reality for the 50% is that it won’t. Some will ‘do better’ than others and this will be used as propoganda to convince the majority that they too can still prosper. But just as the ‘American dream’ is increasingly regarded as a myth to the middle class in the US, the same reality will eventually dawn on the UK’s.
    New-age serfdom is arriving, its a ‘Dune’ world afterall.

  • Drf

    Hi anteos,

    “…supporting the housing market via ZIRP” presumably you mean supporting the banks solvency rather than the housing market?

    “For years they’ve ignored their remit, and this is the end result. A lower standard of living for all.” but surely that is the whole point of it? It is an intentional central bank and government policy, to prop up the insolvent government, and insolvent banks, by stealing purchasing power from the mass of people because government spending at its present level cannot be sustained by present taxes, which are already producing falling yield as they are increased on the Laffer curve, and ever-increasing government borrowing?

    (Forgive my somewhat tongue-in-cheek response!)

  • JW
  • pavlaki

    A relative is involved with this in Nottingham and he is becoming increasingly concerned about the level of abuse in the system of free handouts. It sounds cynical but there are plenty folk out there who will take advantage of this – but what % of the total can be attributed to this? I am reminded of the Gloucestershire floods when bottled water was handed out. I noticed that around a dozen family members of a local restaurant were in the Q for free water and when I followed them they were stacking the back of a van. Sure enough when I next went for a curry the water was on sale! I’m sure that a lot of folk are finding it hard going and income is definitely falling back relative to inflation. I know mine is! Thank you Merv and the B of E.

  • Noo 2 Economics

    H Anteos,
    It’s not as simple as you make it sound. If you want to get “free food” you need to present a food voucher which has been issued to you from organisations like Social Services, Citizens Advice Bureau, Police etc.

    You will not receive a voucher unless you can prove hardship. I havent seen the programme to which you refer where a woman drives off in her people carrier to collect her free food but 2 possibilities occur off the top of my head:

    1. In the “good times” she bought a people carrier and this is a left over of those times. You can argue that she should sell it for food but without knowing her full circumsatnces (disabled child/elderly parent requiring regular hospital visits or other circs etc?) I wouldn’t know.

    2. She simply committed a fraud in which case she should be prosecuted.

  • Noo 2 Economics

    Hi Shaun,
    This gives a whole new meaning to Ravin Dave’s “Big Society”, perhaps this is what he always meant? Or maybe things have evolved this way due to Boy George’s mismanagement of the economy? They must have cynically considered that charities would step in when benefit cuts began to bite and rationalised it by saying to themselves that Government makes payments to big charities anyway…..

  • JW

    I couldn’t resist referring to today’s piece in the Telegraph by its economic editor where he claims the fall in unemployment claimants points to a recovery in living standards.

    Whilst this is poor , I was more concerned by the following sentence which could be construed as a criticism of their lifestyle choices;

    ‘ Although
    employment is rising, the bulk of the new jobs were accounted for by
    Britain’s growing labour force rather than those on the doll.’

    ???

  • therrawbuzzin

    Hi Shaun, another excellent piece, which also leaves dry economics and shows the social repercussions of bankocracy.
    I told you of my experiences in the world of necessity shopping previously, and this article reinforces my point.
    Although I’m not a Christian, I donate on a regular basis to our local food bank.
    Why? Well I’m certainly not wealthy, but neither am I on means-tested benefits, and it’s people just like me who have, unfortunately, occasion to use them.
    They are not wastrels, scroungers or ne’er-do-wells, they are ordinary work-a-day people, forced by desperate circumstance to bite their lip, swallow their pride, and beg for food.
    In 1970, a man could feed clothe and shelter his family on his single wage;
    where are we now?
    Two adults working in a family and still having to go, cap-in-hand, to the state, or to charity, for food.
    British politicians, of all hue, disgust me.

  • therrawbuzzin

    Anteos:
    1) It is not the case that Mummy can pack The Children into MPV and browse the local foodbank; one has to be referred by the DWP.
    2) Many people now pay for their power by direct debit which remains constant throughout the year, and is re-assessed annually.
    This is how I pay my energy bill.
    I’d suggest that food bank usage is a far better economic indicator than either you, or the govt. would care to admit.

  • Midge

    Hi Shaun a good blog written with much empathy.I am sure there are many people now really struggling to pay their bills.The price of chicken and fish for example have made them luxuries rather than staple food.Have you noticed how few people thre are now in dentist’s waiting rooms these days?Yet another way we are getting poorer.The price of electricity and gas has risen dramatically.However it must be remembered a lot of SSE customers would have fixed tariffs to November 2014 as the company was actively selling it as 1 of 2 options.Some families will be better of as household income has risen spurred by lots of part tme employment.In The Rowntree Foundation report of last year stated that 6.1m people in poverty are in working households vindicating your point about falling real wages.After yesterday’s inflation figures which we all agree are a sham means those of us who are working continue to get worse off despite Dr. Fisher saying that wages should rise.Those on state pension are likely but not for certain will receive an extra £3 per week from next April.Doe’s that buy a cup of coffee these days?.

  • Anonymous

    I really feel the UK is teetering here. It’s just so different from the media reporting due to the effective capture of the press by politicians. When something does flare up it will appear as if out of nowhere when on the street it will seem like it’s been a long time coming.

  • ExpatInBG

    Hi noo

    Sterling dropped 25% in 2008 – nought to do with boy George.
    Simplisticlly,
    1 ) excessive govt borrowing weakened sterling
    2 ) weaker sterling triggered inflation in imported food and fuel
    3 ) actual inflation (forget the fantasies of official statistics) has reduced living standards of the 90% or so.

  • forbin

    on the doll ?

    Trust the Telegraph to bring sex into it !

    Forbin

  • Noo 2 Economics

    Hi Expat,
    I agree everything you say but was thinking in terms of his “cutting too hard too fast” – my words and no, I am not arguing for indefinite borrowing but a slower pace of consolidation and immediate recall of all Government loans to the banks (I believe he has that power).

    Once the banks are broken, which desparately needs to happen, they can be rebuilt into fit for purpose, dynamic organisations (i.e. lending money to the real economy rather than international derivatives deals alongside various put options and short selling etc). In fact, had he “spent more” in 2010 and 2011 I believe he would be borrowing substantially less now and his total borrowings would be about where they are now, except there would be a lot more employment and tax revenues coming in with less social security transfers flowing out and greater GDP growth, all adding up to the probability of the beginnings of actual debt repayment in the next couple of years, that is of course, had he managed the mess he inherited responsibly, instead of making further contributions to the shambles,

    A further part of his mismanagement is the failure to implement Vickers report immediately – this all flows into mismanagement of the economy and funnily enough, it all concerns the banks, his party’s election was a golden opportunity to undo Brown’s “saved the world” debacle, instead it has been “meet the new boss, same as the old boss”

  • Drf

    Hi Expatin,

    Surely you have ommitted the effect of QE debauchery and ZIRP, which have had a significant effect?

  • Noo 2 Economics

    Yes Drf that too and another example of Osborne’s mismanagement, as he allowed QE and ZIRP to continue when QE should have been halted on 12 May 2010 alongside a granting of true “independence” to the BOE who, I am sure, would have commenced increasing the minimum lending rate gradually up to circa 2.5% give or take half a per cent.

  • Anonymous

    Hi Edward and welcome to my part of the blogosphere.

    Good luck with your campaign. If you look in my back catalogue you will see that the issue of food banks is a regular entry and real wages are a very regular one.

    Charities deserve praise for their work in the area discussed today but they too are often in need of reform.

  • Anonymous

    Hi WhiteP

    Probably! Or as was suggested in the comments section yesterday the equivalent of a 404 error where the subject goes missing. For example we get a chart of wage growth and inflation today but if you download the data it is annualised not indexed aka you cannot easily work out the drop in real wages in the credit crunch era.

    For example the economic review for October has 17 pages but no mention of what I would have as the main issue…

  • Anonymous

    Hi JW

    I have just looked it up and the one I think you are referring too also tells us this.

    “The drop in claims followed a strong summer, as ,000 jobs were created between June and August.”

    I didn’t realise that creating 0 jobs constituted a strong summer…..

    I had a similar moment earlier as the City AM article had me arguing that loose monetary policy had dangers and Samuel Tombs argued the other side. However I noticed him saying this.

    “a strengthening of the pound should help to bring inflation down too”

    Is loosening the new tightening?

  • Anonymous

    Hi Expat

    I noted that the Trussell Trust mentions work that it has done in Bulgaria. Is it well known there?

  • Anonymous

    Hi therawbuzzin

    I think that you nail it with this bit.

    “In 1970, a man could feed clothe and shelter his family on his single wage;where are we now?
    Two adults working in a family and still having to go, cap-in-hand, to the state, or to charity, for food.”

    If we move to the modern era we see that in a family both parents generally have to work. It is often presented as female emancipation and of course in that sense it is both welcome and true. But that was represented by a choice not by it being effectively compulsory. The water has got muddied and we are the losers.

    Just to be clear in a modern-day family there is no reason why the wife or husband should be the sole worker the point is that both have to and sometimes it is still not enough.

  • Anonymous

    Hi Midge and thank you

    I like chicken and can vouch for the rise in price as the ones I used to buy which were a supermarket version of better welfare standards recommended by the River Cottage man. But the price shot up and oddly so did the size of the birds which were then too large for my use…

    According to ONS poultry prices have risen by 6.3% over the past year but the index (1987=100 so RPI style) is only 147.7. I dread to think what type of chicken that may represent….

  • Paul C

    I heard quite a ridiculous “sound bite” on R4 this morning, the BBC felt it was appropriate to report that conservatives had suggested that use of food banks has doubled because the number of food banks have doubled…simples. 5 minutes later in the same R4 programme, a interview was conducted on the subject of why “short-termism” was responsible for poor investment outcomes, indeed economic growth, the research results were delivered quite slowly by the interviewee, a moment before they were to cite the true cause and the interviewer cut them off (because there was no time left) as a planned comedy you couldn’t do better.

    Apparently you can only get dried food and tins from the food bank, like spam so it is not going to be the best diet, but better than starving.It will be interesting to spot when the new “multi-cultural” British stiff upper lip falters, and folk are able to admit to their neighbours that it really has gone too far. I think we still have a few years of politician inflicted “divide and rule” where social conformity and plain pride suppress people’s actual feelings and views.

    There will be more food banks I reckon in 2014.

  • therrawbuzzin

    http://www.bbc.co.uk/news/uk-politics-24553611

    “…Two thirds of children officially deemed as being poor now came from a family
    where at least one parent was working – and in three out of four of those cases,
    at least one of their parents was working full time, he pointed out…”
    Obviously my point was not about the value of “traditional” roles in that post; it’s just that, in 1970, the “male-breadwinner” was seen as the standard.

  • therrawbuzzin

    Shaun, one point if I may:

    Do you really think that the encouragement of (married) women into the workplace, under Thatcher in the Eighties, had anything at all to do with emancipation???
    Thatcher wanted to swell the workforce with non-union labour in order to drive wages down and to “discipline” that workforce.
    It is the designed RESULT of that policy, ie the enslavement of both sexes, rather than just the one, that we see now.
    The idea that Margaret Thatcher did anything at all, even by accident, for social progress almost made me chuckle.

  • Edward Harkins

    Shaun agree about charities (including some ‘social landlords’ i.e. housing associations) in need of reform. I see that (as folks like me have been warning it would come) the BBC flagship Panorama investigatory programme will be doing a special of charities and remuneration in November – ominous.

    The #CPW13 event in Glasgow this morning was on food poverty. The essential message coming out was that ‘”It’s poverty stupid – not fuel poverty or food poverty – just poverty”. To meaningfully address that also requires addressing the gross and unjustified inequality in income and wealth holding. The UK is, of course, (together with the USA among the most unequal in all mature economies).

  • Anonymous

    I’ll ask – I’ve never heard of it’s work here. There is poverty and deprivation here, on a scale not normally seen in Europe.

  • Anonymous

    Hi Drf,

    Agreed, Basically I thought it unneccessary to say – high inflation is bad policy – debasing the money, the savings and the industrial base.

    In short stability (like historic DMark) is only sound policy, inflation is for losers.

  • Anonymous

    Hi Noo,

    The conumdrum is – borrowing & inflation is a path to ruin and disaster, but economic policy to avoid this involves painful cuts.

    If your economy is so weak that you need to borrow hand over fist to stop sinking – you are too late.

  • Anonymous

    British politicians maybe, but the British political system is divisive and serves the voters poorly. No party should gain a commons majority with 35% of the vote. “safe seats” rob voters of a chance to affect the outcome. Too many voters are disenfrancised.

    British unions were confrontational and used extortion & blackmail. I don’t think the NUM should have the right to beat scabs or turn my lights off. By comparison, German unions work with their businesses collaboratively to help all parties. Britain could learn from best practice overseas.

    Curiously, Thatcher never charged VAT on essentials but Bulgaria’s Stanishev (Moscow educated commie) does. VAT on cold foods and stuff like nappies is horribly regressive. (Eg Lidl nappies are approx 6 euro in England, 6.20 EUR in Germany but 8 euro in Bulgaria)

    I suspect Thatcher would have donated you a bus fare to defect where the commies shot hundreds trying to defect and killed many thousands in gulags. I conclude that extremist politics are bad and inclusive cooperative politics are better.

    PS. Don’t think I’m defending Thatcher – I want good outcomes regardless of which politicians deliver them.

  • Noo 2 Economics

    If it goes on indefinitely (as in the UK) I agree, but on my plan I pointed to repayments about 2015 onwards. At that point, with borrowing non existent, your only inflators are wages, FX and institutionalised inflation. Wages are currently deflationary and the Government can sort out their self induced inflation in the blink of an eye, which leaves FX and therein lies the real problem imo…..

  • Noo 2 Economics

    ….and look what the cuts achieved – high inflation, stagnant economy and higher spending – yes as a result of the cuts – thats what your’e missing. You’re using those old economics text books I studied at A level back in the early 80′s, but they’re so much garbage now, they just don’t work any more. See my other reply too.

  • Anonymous

    Cuts, what cuts ? The UK is not close to a balanced budget. It is farcical to claim Boy George is cutting anything while expenditure INCREASES.

    The last time the UK had cuts was under Ken Clarke. This brought on a strong recovery, but too late for the Tories to benefit.