Office for National Statistics data published today shows that inflation has fallen to its lowest level of 4.6% since November 2021. However, this does not mean that prices are falling, but rather that they are rising at a slower rate. The price for essentials such as food, gas, and electricity remain high. Given that low-income households tend to spend a larger share of their overall earnings on the essentials, the continuing high prices are putting huge pressure on those who can least afford it.

Inflation is particularly impacting women and low-income households

Food inflation has eased slightly from its peak over summer, but remains high, with prices 10.1% higher now than at the same time last year. This is putting pressure particularly on low-income households, especially when we consider that overall food prices are 28.5% higher now than they were two years ago.

Research by the Work Foundation has found that insecure workers are more likely to report that they are struggling financially than those in secure jobs, suggesting that these workers are more likely to be hit hardest by the rising price of food. We also know that women in insecure jobs (32%) are significantly more likely than men in insecure jobs (23%) to indicate they are struggling to get by.

Women are sometimes described as the “shock absorbers” of poverty and are disproportionately impacted by higher costs of living due to a higher likelihood of working in insecure work as well as having lower earnings and savings. This is compounded by the fact that women are more likely to combine paid work with caring responsibilities. Jane van Zyl of Working Families told the Work Foundation today:

Jane van Zyl, Chief Executive, Working Families

Parents on lower incomes are more likely to be denied flexible working and so find themselves in situations where they are forced to forego promotion, reduce their hours, or leave the workforce entirely in order to manage their caring responsibilities. This therefore exacerbates their already challenging financial situations.

Figure 1: CPI falls to lowest level since October 2021

Source: Office for National Statistics (15 November 2023). Consumer Price Inflation, UK: October 2023.

The new figures do not mean that pressures are easing

We highlighted yesterday that is positive to see strong wage growth of 7.7% and falling inflation finally result in real income gains for workers. However, we also know that workers in some sectors continue to miss out, particularly in low paid and insecure roles. At the same time, we must not forget that businesses also struggle to cope with increasing operating costs as well as higher salaries for staff. Professor Hilary Ingham from Lancaster University told the Work Foundation:

Professor Hilary Ingham, Head of Economics, Lancaster University

Small and medium sized enterprises are estimated to account for three-fifths of employment in the UK. Wage rises are having an effect on these smaller organisations in terms of their ability to recruit and retain staff. Martin McTague from the Federation of Small Businesses, told the Work Foundation today:

Martin McTague, National Chair, Federation of Small Businesses

What does this mean for the Autumn Statement?

As hiring is slowing down and the labour market is cooling, it is key that the Government responds appropriately to the challenges workers and businesses are facing in the upcoming Autumn Statement. Although the exact content of the Chancellor’s fiscal plans is not yet known, there are rumours that the Chancellor may propose real-term reductions to benefits in order to make room for future tax cuts. However, the level of benefits currently already puts people at risk of poverty and destitution. The UK’s unemployment benefits currently provide just 17% of recipient’s previous income levels – the lowest in the OECD. It is therefore vital that the Government does not step back from its commitment to uprate benefits for 2024 in line with September’s inflation data (6.7%) at the Autumn Statement.

Last month, the Chancellor announced at the Conservative Party Conference that he was considering toughening sanctions for those on benefits. Introducing further punitive welfare sanctions would be highly damaging. Instead, the Government must focus on improving the quality of jobs available and providing more tailored support for jobseekers with different needs.

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