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.
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.
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
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….