Surprise inflation uptick raises concern for low-income households, warns the Women’s Budget Group

• Inflation rising to 4% from 3.9%, as revealed in today’s figures, is concerning news and proves the cost of living crisis is far from over. Overall prices remain high, and low-income households, especially single-parent families, continue to grapple with the rising cost of living.
• While the Government relies on the Consumer Price Index (CPI) to gauge inflation, it is crucial to recognise its limitations in understanding the true impact of higher costs on households.
• Geopolitical tensions in the Middle East also risk exacerbating inflationary pressures resulting from disrupted shipping routes.
• When the Bank of England next sets interest rates, it should conduct an equality impact assessment to understand how its decisions will affect different groups and should work with the Government to better coordinate monetary and fiscal policy.

Dr Mary-Ann Stephenson, Director at the Women’s Budget Group said,

“Inflation figures announced today are concerning given the predictions that CPI inflation would be falling. Furthermore, inflation as measured by the CPI doesn’t tell us the full story. We also need to look at alternative metrics, such as the Household Cost Index (HCI) which includes significant costs like rent, mortgage payments, and interest payments on debt, to better understand what households spend money on.”

“The most recent HCI figure was for September 2023 which stood at 8.2%.^[1] That was a  significant 1.5 percentage points higher than the 6.7% inflation figure widely reported at that time. This gap matters given that the increase in working-age benefits from April 2024 is tied to the latter, which means the real value of benefits is being eroded and helps explain why so many households reliant on benefits can’t make ends meet and are getting increasingly into debt to cover basic necessities.”

“Additionally, the HCI sheds light on how different demographic groups experience the rising cost of living. ONS data revealed that households with children faced an annual HCI inflation rate of 8.4% in September 2023, surpassing both households without children (8.1%) and the CPI (6.7%) for that month by 1.7 percentage points. The Consumer Insights Tracker shows that women and households with children are more likely to have “cut the size of meals or skipped meals because there wasn’t enough money for food”.^[2] We also know that the cost-of-living crisis has turned into a cost-of-debt crisis, impacting women particularly because they have lower savings and are less able to pay back their debts.^[3]”

“While politicians claim that financial pressures on households are easing, we need to remember that prices continue to rise. Inflation going up again proves the cost of living crisis is far from over and the situation for millions of low-income households across the UK remains stark. Recent geopolitical events in the Middle East raise serious concerns about another intensification of inflationary pressures resulting from disrupted shipping routes.”

“When the Bank of England assesses current inflation to set the interest rate, it should conduct and publish an equality impact assessment of its assumptions and decision. The presumption that the Bank of England’s interventions are ‘market neutral’ masks the equalities impacts of those interventions, which are far from neutral.”

“We need to see the Government recognise and respond to the very real ongoing and emerging economic challenges rather than claim things are going in the right direction while threatening to cut taxes and welfare which will only make the situation worse for those already at the sharp end.”

WBG spokespeople available for comment, contact

press@wbg.org.uk

About the Women’s Budget Group

The UK Women’s Budget Group (WBG) is the UK’s leading feminist economics think tank, providing evidence and analysis on women’s economic position and proposing policy alternatives for a gender-equal economy. We act as a link between academia, the women’s voluntary sector and progressive economic think tanks.

Notes to Editors

• Inflation as measured by the CPI shows us the change in the price of a fixed basket of goods and services across all UK households.
• In contrast, the Household Costs Indices (HCIs) illustrate how changes in prices and costs impact specific subgroups within the population. The weight of each component in a subgroup’s “fixed basket” is determined by the average household’s proportion of expenditure.
• WBG published a briefing on gender and monetary policy on the 21st September 2023.

^[1] ONS Household Costs Indices for UK household groups: January 2022 to September 2023

^[2] Consumer Insights Tracker October 2023.

^[3]  StepChange (2023) Bearing the burden: Unravelling women’s debt dilemma.