Yesterday’s inflation figures from the Office for National Statistics (ONS) provided the UK with a small glimmer of hope. Inflation rates as measured by the Consumer Price Index (CPI) were lower than expected at 7.9% in the year to June 2023, down from 8.7% in May. This exceeded economic forecasts which had predicted inflation rates would decline to 8.2%.

While it is positive to see inflation falling, it remains stuck above 7% for the 16^th consecutive month. UK inflation is still the highest in the G7 and among the highest of OECD advance economies.

This is prolonging the living standards squeeze that has been a particular disaster for the 6.2 million people in severely insecure work. Insecure workers are most likely to be employed in sectors such as hospitality and retail, which have seen below inflation pay rises. And the Work Foundation recently found that around half of people in insecure work earn less than the Joseph Rowntree Foundation’s Minimum Income Standard of £25,500 per year, leaving them vulnerable to inflationary pressures.

Figure 1: Rate of inflation from 2020 to 2023

Source: Work Foundation calculations using Office for National Statistics Consumer Price Inflation Tables (18 July 2023). Table 1: CPIH, CPI & RPI indices: the latest three years. Available from: https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation

The number of business insolvencies was 27% higher in June 2023 than in the same month last year. And 2022 saw a 14% increase in insolvencies in hospitality. This means that not only are insecure workers in this sector feeling the bite of the continuing rise in costs, they may also be at higher risk of job loss.

Fuel drives improved figures, but transportation remains a challenge for many

The main contributor to the easing in annual inflation rates came from the fall in the price of motor fuel which has dropped by 22.7% in the year to June 2023. While this will be welcome news for car users, yesterday’s figures were not all good news for motorists as the cost of transport insurance has almost doubled (+47.9%) in the past year.

Yesterday’s figures also revealed that it has been a tough year for people reliant on public transportation, as the cost of passenger transport by railway and road has risen by 7.4% and 4.9% respectively.

The continued pressures on transportation prices will be felt particularly by those in insecure work. New research by the Work Foundation has found that 24% of people in insecure work have had their job choices limited due to transportation costs, and 18% felt limited by transport availability. Our research found that workers in London, the East Midlands and the East of England most frequently reported transportation as a significant constraint, but more broadly this can be an especially acute challenge for people in rural places, and for those with access and mobility challenges.

Food inflation may be down, but it’s still impacting low-income households

The second key contributor to last month’s slowing of inflation was the fall in food and non-alcoholic beverage prices, from 18.3% in May to 17.3% in June. While this is a step in the right direction, food inflation continues to have a severe impact on low-income households. With food and non-alcoholic beverages overtaking household bills as the biggest contributor to CPI inflation, food costs continue to be at the centre of the cost-of-living crisis.

When looking more closely at the cost of food, the figures provide a stark insight into the challenges faced by low-wage and insecure workers and their families in accessing a healthy and well-rounded diet. In the past year prices have increased by 17.3% for bread and cereals; 22.8% for milk, cheese and eggs; 10.2% for fruit; and 19.1% for vegetables.

Figure 2: Rise in food costs between 2022 and 2023

Source: Work Foundation calculations using Office for National Statistics Consumer Price Inflation (19 July 2023). Table 4 CPI: Detailed figures by divisions, groups and classes. Available from: https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/consumerpriceinflation

The Joseph Roundtree Foundation estimate that 5.7 million low-income families in this country are already forced to eat less or skip meals. Additionally, the Resolution Foundation has reported that households will have seen a £1,000 increase in food bills since 2020. A minor improvement to inflation figures will do little to improve this situation.

Research by the Work Foundation has found that part-time insecure workers and freelancers were more likely than other workers to indicate they were struggling financially, at about 34% from both groups, compared with 23% of full-time workers. Therefore, it is likely these workers will be among the hardest hit by the rising price of food.

Rising household bills continue to put pressure on insecure workers

Despite having been overtaken by food and non-alcoholic beverages, household bills remain a significant driver of inflation and continue to hit low-income families the hardest. The ONS figures reveal that inflation for housing, water, electricity, gas and other fuels stands at 12%.

Basic household bills have seen major increases with gas up by 36.2%, electricity by 17.3% and water supply by 8.9%. Tenants in the private rental sector have also seen a substantial 5.5% hike. And the picture is not much better for homeowners, with the CPIH, the Consumer Prices Index including owner occupiers' housing costs, reporting increased costs of 4.4%.

The current unpredictability of household bills, from soaring gas and electricity prices to sudden rises in rental and mortgage costs, are making it increasingly difficult for households to financially plan ahead. This is likely to be felt even more severely by insecure workers, as research by the Work Foundation shows that one in three of those in insecure work are uncertain on how much they’ll earn over the next three months, adding even more uncertainty to household finances.

While yesterday’s news provided some relief, the Government needs to recognise that millions of workers in low paid and insecure work remain trapped in a cost-of-living crisis that is severely undermining living standards and will be here for a long time to come. The Government must therefore prioritise lowest paid workers for support, including announcing that it will raise the national minimum wage, in April 2024 in line, or beyond inflation, to ensure that those who are the lowest paid are best supported through the cost-of-living crisis.

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