Inflation: the real cost of rising prices

Woman shopping for bread
Photo by Laura James from Pexels

I renewed my household insurance on 31 July and it was a shock. The renewal price had jumped from £253.40 to £294.24, an increase of 16%. 

My  attempt at negotiation failed:

”Mr Benson this is the final price after all the discounts”.

Rising prices

I have had so many prices rises in recent months. The car insurance was up 4%, the council tax  was up 6%. Every week petrol prices go up and that’s before I even consider energy prices or general food shopping.

Energy prices are in the news now as the cap on pricing has been lifted by 12%. This increase comes on top of a price increase of 9% in April of this year. Even looking on comparison sites I could not see a lower tariff. With all these prices rises coming now and with even more coming down the track, charities are forecasting an additional 500,000 people will be plunged into fuel poverty. This could be the bleakest winter on record for millions already struggling on low wages and benefits.

How we measure inflation

Inflation is actually about price rises and as inflation increases the pound in our pockets buys less. A convenient way of thinking about the Consumer Price Index (CPI)  is to imagine a very large shopping basket full of goods and services on which people typically spend their money: from bread to ready-made meals, from the cost of a cinema seat to the price of a pint at the local pub, from a holiday in Spain to the cost of a bicycle.

The content of the basket is fixed for a period of 12 months, however, as the prices of individual products vary, so does the total cost of the basket. The CPI, as a measure of that total cost, only measures price changes. If people spend more because they buy more goods or for example on energy this is not reflected in the basket and the calculation.

From the North East

The real inflation rate

Government and the bank of England make big economic decisions based on the official rate of inflation for example increasing interest rates, state benefit rates and wages for government employees and in the NHS.

For those on low wages, benefits and those just managing to survive the official rate of inflation is irrelevant. The 21% increase in energy prices this year alone will cripple so many families along with the spiralling cost of petrol and running a car. The official rate does not have a weighting for low-income families where a much higher percentage of their income will go on energy and petrol if they can afford to run a car.

For low-income families, real inflation could be running at 5-10% depending on individual circumstances. Fuel poverty is when 10% or more of an income is used to pay for energy bills.

The very sad reality of this is that government does not care and the energy companies are allowed to make billions of profits when the most vulnerable are left literally in the cold. So, making a decision on whether to eat or freeze will be part of everyday life for so many more this winter. 

While people freeze or starve our Eton liberal elite multi-millionaire  posh boys in government may simply light up a cigar or enjoy a brandy in one of their London clubs whilst debating what else to do to increase the wealth of their friends and Tory donors.

I note the ultra-rich chancellor could stand to benefit financially from the pandemic .

How can these Tory ministers understand real people’s lives and day to day challenges?

A perfect storm

The government Furlough scheme ends in September and it’s likely that substantial numbers will lose their jobs. The £20 weekly increase in Universal Credit is also reversed and now energy prices are sky rocketing.

All this is happening at the worst possible time for families up and down the country. Here in the North East the usage of the local food banks rocketed during the pandemic. The local food bank supported by the fans of Newcastle United, reports that 26,228 emergency supplies were given in the first six months of 2020 compared with 32,038 for the whole of 2019. It’s very clear from charity reports that national usage of food bank will substantially increase further during the rest of 2021


I wrote about John in the autumn of 2020 when he told me he had just 3p in his bank account. He continues to be very cheerful and he is a volunteer himself giving out books to others in his community through a local centre.

He also has participated in a play with rehearsals being done by mobile phone. With a small bit of funding to a local charity and great digital technology and the goodwill of many, the play was successfully performed remotely during March of this year. I was able to listen to it using a link from the internet.  It was so satisfying for him to be part of a small team and achieve this against all the odds.

John is unique and yet typical. He has a fixed income; he relies on job seekers allowance and survives on £74.70 a week. It increased from £74.35 the prior year. He is cheerful but his declining health is starting to have an impact.  He has no one acting as an advocate to help him navigate the benefit system and ensure he gets the right level of benefits.

Winter for John

Last winter was very hard for John. I had managed to get him extra blankets and duvets and he was able to stay mostly warm even with no heating on in his flat  for long periods. This winter will be impossibly difficult with energy price increases.

Officially inflation may be at 4% by December but that statistic is irrelevant for John and all struggling now on meagre benefits or low wages. He, like me and everyone else pays the same bills: water, heat, gas, TV, mobile phone, food and council tax but on a very low fixed income.

Cash for access

I feel sickened to read almost daily about fresh funding or donor scandals in the Tory party. The endless talk of big business paying vast sums for access to government ministers and even the Prime Minister tells me we may have the most out of touch political party in the history of the UK.

Poverty and depravation are real and in every neighbourhood, although better hidden in some than others. If there is any social justice at all in our country let it be for ‘John’ and so many like him.

The proposed cut in Universal Credit must be stopped and energy companies must be forced to help those in fuel poverty and struggling to pay their bills

As a caring society we must take care of all.

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