Cost of living crisis: rising food prices, rising debt
As the cost of living remains close to its highest level for 40 years, the final episode in our series on the cost of living crisis asks who is paying - and how.
The Podcast
Rebecca McDonald, chief economist at the Joseph Rowntree Foundation tells host Darren Jones MP that many families are struggling to meet basic costs such as food. A recent survey by the social change organisation revealed that 2.4 million households had borrowed on credit cards to pay essential bills in the past few months. Bank of England increases in the base borrowing rates have pushed up interest, increasing the costs of debt. Although the Government should get credit for the support given to low income households so far, she asks why the safety net of social security has not been adequate in the current ‘economic shock’ and calls for support for people on low incomes to be reassessed to provide a decent quality of life.
Turning to the Chair of the Environment, Food and Rural Affairs (EFRA) Committee, Sir Robert Goodwill MP, Darren asks what’s pushing up the cost of food and they consider the impact on the farming sector. The EFRA Committee is currently undertaking an inquiry into food security.
Harriett Baldwin, Chair of the Treasury Committee describes the ‘pernicious’ effect of inflation as a ‘tax on the poorest in society.’ She discusses recommendations to spread cost of living payments across winter months to avoid ‘cliff-edges’ for those on low incomes.
This episode airs as Government borrowing hit its highest November level since records began in 1993, according to the Office for National Statistics. However, the JRF’s chief economist said it was necessary to support households and the economy so that things don't get worse and a better recovery is possible.
Transcript
Darren: The cost of milk is up, the cost of bread, the cost of pasta is up as well. Food price inflation hits 16.2% in the year up to October. And even with food price rises beginning to slow, the cost-of-living remains close to its highest level for 40 years. Who's paying for this and how?
Welcome to Committee Corridor. I'm Darren Jones, Chair of the House for Commons Business Energy and Industrial Strategy Select Committee. We’ve spoken a lot about heating, and today we’re looking at eating.
Ahead of the autumn statement, the Chancellor, Jeremy Hunt, said he wanted to bring the price rises under control. I'll be asking the Chair of the Treasury committee, Harriett Baldwin, how the Chancellor is getting on. Her committee keeps a close eye on the work of His Majesty's Treasury.
The Environment, Food and Rural Affairs Committee has been digging into the cost of food production and our food security. We’ll speak to the Chair, Sir Robert Goodwill. But first, the Joseph Rowntree Foundation is an independent social change organisation that wants to see a prosperous UK without poverty. Rebecca McDonald is the Chief Economist.
Darren: Rebecca, this series, we've been talking about the cost-of-living crisis, looking at energy bills, levels of employment and pay at work, and also, looking at other costs such as food where we've had some really quite shocking increases in prices over the last year that people are experiencing every day.
Can you just help us understand why?
Rebecca: One of the worst things that's happening at the moment is the increases in the price of food and also in non-alcoholic drinks.
I think across the last year, the ONS found that there was around 16% increase in the price of these things. And of course, that's something that is so essential for everyone. And so, it's very, very obvious when the price of food is going up and very difficult for people's budgets to adjust.
In terms of what's going on and why this is happening, I think one of the main reasons is to do with the input costs. So, the various costs that are associated with getting that food kind of from farms onto shelves, and various different parts of that process have become much more expensive.
So, for example, the price of transporting food has gone up. A lot of that is due to increases in the cost of fuel and the Ukraine war is definitely to blame for some of that. There's also been increases in the cost, say, of plastic, which has led to packaging costs going up, energy costs, of course, where there's processing involved — these have increased.
And the other thing is, of course, many parts of that supply chain, including supermarkets, have wanted to increase wages or have needed to increase wages for some of their workers to respond either to labor market shortages or to the fact that their workers are, of course, dealing with inflation themselves.
And so, all of these things have, kind of, combined, and as a result, some of this is feeding through into the prices on shelves and leading to higher food prices.
Now, of course, the fact that a lot of this is driven by what's happening in Europe and the war, means that it's highly uncertain as to how long this will last for and what might happen next, which is obviously not particularly optimistic.
But hopefully, as soon as there is a bit more certainty around that and some of those price increases, say in fuel or in plastic, stop rising so fast that will hopefully feed through into the prices that we're seeing on the shelves.
Darren: We're expected to go into a recession now in the UK, which will presumably slow things down a bit. Do you think we're going to see a downward trajectory on inflation that will help bring down some of those costs that people are suffering on the frontline?
Rebecca: Yeah, so the expectations around inflation at the moment, are that it will remain high for the rest of the year. And then in next year, in 2023, it's expected to fall.
And actually, at the moment, some of the forecasts are fairly optimistic in the sense that they're expecting it to fall quite rapidly, even perhaps go back to its target level of 2% by the beginning of 2024.
Now, of course, things are very, very uncertain at the moment, and it may not fall that rapidly, but if it does, then that will mean that we could start 2024 with much more usual and kind of stable rates of price increases.
But of course, the key thing about this is that even if inflation falls, and even if by the beginning of 2024, it's back to 2%, prices are still going up. That doesn't incorporate or that doesn't include a fall in prices.
And so, actually, we'll see the higher prices that we've seen over the last year or so, in some ways, could become baked into the system. And yes, inflation will be down, but people will still be dealing with prices being at a kind of permanently higher base.
Darren: And of course, there's a huge inequality challenge here for people on higher incomes. We might adjust what we spend our money on, you might go out for dinner less often or maybe not go on expensive holidays in order to pay for your energy bills or the extra price in food. But for many, many families, they just don't have the option to do that.
And there's likely to be some economic scarring, isn't there — for people on lower incomes. Is this a problem predominantly for people say, out of work, or is it going to be a problem in t he long run for people in work as well?
Rebecca: At the moment, we are seeing this being a problem for both sets of people. So, it's predominantly for those on low incomes, as you say. This is much more difficult to manage.
But unfortunately, we do have many people in this country who are in work, but still on a low income. It's not just those who are out of work who are struggling.
In terms of why it's so much more difficult to adjust one's budget, and I think some figures that really helped to illustrate this is that last year, around about 12% of a lower-income family's budget went on energy. And if you compare that to a family on a middle-ish income, that was 4%.
So, you can just see there, the stark differences between the share of someone's budget that is spent on that one particular bill, and how then when that bill goes up and goes up particularly as high as it has done recently, that is so much more difficult to adjust if it takes up a bigger share of your budget.
And those numbers have changed as well. By this financial year, those differences were 16% for low-income families, and 6% for middle-income families. And those percentages will just be increasing as we go through and as energy bills continue to rise.
In terms of scarring, I completely agree. Unfortunately, there will be long-term effects of this for many people. In particular, I’m worried about the number of people who are falling into debt at the moment, and having to increase borrowing specifically just to cover essential bills.
So, Christmas is coming up. Many people may be thinking about potentially borrowing to cover Christmas presents or boring to be able to afford some of the luxuries that they're used to at Christmas.
But actually, for many families on a lower income, the worries are much more fundamental, and it's about borrowing, so they can keep the heating on, or falling into debt so that they can afford enough food for their family.
It's not just about credit card loans to buy extra presents, it's really, really fundamental worries about keeping the lights on and keeping the heating on.
Darren: And the Bank of England will often change the base rate that it sets. And that can have an impact on lots of different types of financial products.
Can you just explain to listeners what that means in practice and what it might mean for people with credit card debts or other types of loans?
Rebecca: Yeah, so the Bank of England's base rate is the interest rate that they set, and it’s kind of the default, the base interest rate for the country. And then different banks and different lenders set the interest rates that they use based on this.
So, what happens is if the Bank of England increases the base rate as they've been doing in recent months, what then happens is that the interest rate that someone pays on their mortgage or someone pays to pay back their credit card bills, all of those costs go up as well.
And so, as the Bank of England increases or chooses to increase interest rates, this has a very, very tangible knock-on impact on families' budgets across the country.
Now, if we look at some of our recent figures from November, which look at and monitor how people are faring in the cost-of-living crisis, we surveyed low-income households and we found that 2.4 million of these households have had to borrow or specifically, have had to use credit cards to pay for essential bills. And this is across the last few months.
And so, for those families, not only is it very difficult for them to have to borrow specifically for essentials, but now, if interest rates are rising, the impact of this on their finances in the long-term will be harder. Because of course, paying off those loans will become much more expensive.
Darren: And it's a compounding problem here, isn't there, for people on lower incomes? Because those people tend to have worse credit ratings because the banks recognise they've got less disposable income to pay for things like debt, whereas people on higher incomes, can borrow more cheaply.
Do you think there needs to be more focus on this, and that lower people are needing to borrow money to pay for the basics, and probably end up in a much tougher situation as a consequence?
Rebecca: Yes, that's definitely true. I think the cost of borrowing has been calculated by several different organisations to be much higher if you are on a low income or if you're already in debt.
As a result, we do see that many people in poverty or living in particularly deep poverty, turn to very high interest forms of borrowing. So, we know that there are many people who are in debt, say to a loan shark or to payday lenders.
And for them, of course, the costs of them having to service those debts is much higher. There is quite a lot of excellent research out now on what's called the poverty premium, which is where you end up paying much more for a service if you're living in poverty, than if you say you're on a higher income.
And it's definitely a problem. I know that there are organisations that are trying to change this, and are trying to provide much more affordable forms of credit for those on low incomes, and especially, at the moment are doing a lot of good work to try and make sure that people don't turn to the most expensive and dangerous forms of lending.
Darren: Now, you mentioned earlier that we might start to see inflation come under control as we get into 2024. This is the last episode in this series on the cost-of-living crisis. And so we want to take a kind of look at the slight longer term there.
But the Office of Budget Responsibility, which is an independent economic body for the government, has forecasted that there will be a loss of 7% in real disposable household income by the end of the financial year ‘23/24. That's the largest on record by some way.
What should the government be doing about this? Can it do anything to help?
Rebecca: Yeah, this is a huge loss in household income that's predicted, and it kind of has already started but will continue through the next year.
And I think that figure from the OBR that you cited is actually even after accounting for all the various cost-of-living support packages and the energy price guarantee. So, even after what the government's already announced to help people, they will still be seeing their household incomes fall in this quite significant way.
Which is obviously a very bleak outlook from the OBR and very, very difficult for people to handle.
I think in terms of what can be done; I do want to give credit to the government in terms of the support that's already been planned and has already been announced. I think the way in which the combination for next year of the energy price guarantee and additional cost-of-living payments — the combination of those two things will provide a significant amount of kind of emergency support for the next financial year.
And in terms of the policy goal of, kind of, simply trying to prevent things getting much worse for families, as costs continue to rise and stay high next year, it will do a lot of good in that regard.
But I would say there's two, kind of, caveats there to my positive take on what's happened, and two things that I think need reassessment in terms of what can be done.
The first is looking right now at this winter. And while there is significant support that's been already given and will continue to be given throughout the winter, the really bleak truth is the reality is many families are still struggling.
We know that many are still finding it very difficult to heat their homes, to afford enough food. In our most recent survey, we found that 3 million lower-income households can't afford to keep their house warm at the moment.
So, the reality is that despite the level of support that's already been given and planned, the reality is very bleak. And I do think that even though, kind of, in the policy world, we've moved to talking about next financial year, we've kind of talked as if the job is done for this winter.
I think there probably does need to be a, kind of, reassessment of whether there really is enough support for those on the lowest incomes right now to help them get through, especially, if January and February are very cold months.
And then secondly, my other caveat is a kind of longer-term perspective here, which is that yes, the policy goal that you have in an emergency is to stop things getting a lot worse. And in some regards, that's been done quite well.
But if you also have a policy goal, which is that people have a decent quality of life and are not having to borrow to pay essentials and are not having to go without these essentials, then even though we've managed to prevent things getting a lot worse this year, the situation before this year came into being was still very bleak for many families.
We started with years of before the pandemic, persistent poverty rates, rising destitution rates, and many people were already struggling to afford the essentials last winter.
So, we've achieved one policy goal in the sense that it hasn't got a lot worse, but I think we really need to take a hard look at people's quality of life for those in the lowest incomes in the long run.
And for this, I would like to see a lot more action in terms of some more permanent policy change, and in particular, looking at the social security system, and asking why this safety net has not been adequate when we've come into a shock like this or a really difficult economic period. And why it is that even with additional help, families are still having to go without the essentials.
Darren: Now, the government will probably say in response to your comments there, that it can only spend the money that it either borrows or gets in from taxation.
And when businesses are not making profits or there are not people in work on higher incomes paying more tax, and with national borrowing already very high after the banking crisis, and then Brexit and then COVID, that the Chancellor's in a bit of a tricky position in terms of being able to spend money on those types of initiatives. What's your response to that?
Rebecca: Yes, I mean, it's definitely a difficult time fiscally. I think usually, when you come across an economic shock or a really difficult context like this, it comes after some years of economic growth and prosperity, and it means that the government's ability to fund some emergency support is there.
Of course, in this situation, it's very different. This is hitting just after we've had another huge shock in the COVID pandemic, and we've had a huge amount of expensive support that's just been provided during that.
So, it is a very difficult time in that sense. And I do think it requires tradeoffs, and we can't pay for everything. We can't give full universal support to help everyone deal with these higher bills, and those difficult choices are right.
But for me, the absolute priority is that we make sure that those who are the most vulnerable and don't have the financial resources themselves to deal with these price rises, to make sure that policy protects them and stops things getting worse for them, and ensures that they have a decent quality of life despite these huge shocks.
So, for me, I think when the Chancellor, when the government is weighing up these choices, that's the thing to protect and that's the thing to invest in.
Darren: So, the government often talks about the nation's credit card. Has the government recently ruined its own credit rating in terms of the cost of borrowing given the Treasury has had to borrow many year on year for many, many years now?
Rebecca: Well, thankfully, the UK in general has good credibility and is able to borrow money, and is able to do that securely and on a long-term basis. So, in general, the UK is okay in that regard.
Of course, you mentioned the recent developments, and of course, the mini-budget did really test that, and we saw the consequences of when people who are lending to the UK government are a bit spooked, and when our credibility takes a bit of a nosedive.
But I am confident that the blip that we saw this autumn is probably just a blip. And I think we have seen that yes, probably borrowing is slightly more expensive than it was going to be otherwise, which is very unfortunate.
But on the whole, I don't think that's going to be a long-term problem as long as the government continues to show how it plans to raise revenues and how it plans to balance the books in the longer term.
Darren: And do you share the concerns that some people have about the level of national borrowing?
Again, I don't really like the saying, but to go back to the government's use of the nation's credit card; if you look at it as in terms of how much are they borrowing against how much we earn as a country or as a percentage of GDP, our borrowing is pretty much over a hundred percent now.
We borrow more as a percentage of what we earn every year. Does that trouble you?
Rebecca: So, it is high at the moment. I think one of the reasons that I think that's in a way necessary, is that I do prescribe to this idea that when you come across huge economic shocks and very, very difficult economic positions, that as a government, you should step in and try and support both households, but also the economy so that things don't get worse, and that there can be a better recovery.
So, I think it's right that in something so unprecedented as a pandemic and then an energy crisis caused by a war, I think it's right that the borrowing has gone up, and that's okay.
I think what's important is that there's a long-term plan that says how will the government's borrowing and kind of overall balance recover and be doing well in the longer term. And I think in some ways the Chancellor is right in the sense that he set out the various fiscal rules in the autumn budget, which is his attempt to do this.
But it’s obviously fairly subjective and it's an art, at what point should that target in terms of borrowing and GDP be met? There is no specific date at which there's a right or wrong answer. And that's very difficult for any chancellor.
But I think that the important thing is that there are targets and clear plans in place. And I think we've seen as the response from the markets after the Autumn Budget showed us that actually, in general, credibility was kind of recovered through that kind of planning.
Darren: And when the government thinks about what it might do, it's not always about spending, it can be about policy decisions.
I understand the Department of Work and Pensions has been arguing amongst itself for some time over the definition of poverty or possibly child poverty specifically. Do you think our definitions of what poverty means are up to date or do those need to change as well?
Rebecca: There are lots of different definitions of poverty, and I think that's right. I think there is no one way of accurately measuring poverty. And I think it's good that we have different measures like a Relative Poverty Rate, an Absolute Poverty Rate, a Child Poverty Rate as you say.
And I think it's best to kind of look at all of them at the same time, and they tell you about different caveats, different things that are going on at the same time.
The difficulty with the main poverty rate at the moment, which is the one that we use at Joseph Rowntree Foundation, is the Relative Poverty Rate.
I think usually, that's the best rate to use. However, the problem is that by definition, what you're doing is you're comparing how those on middle incomes are faring compared to those on low incomes.
And when you're in a shock like this (and this is also relevant during, say a recession usually) actually, everyone's incomes are falling. And because of government support, those on low incomes might actually have a smaller fall in their incomes.
And so, you can get to a situation, which is slightly mad, where you're in a situation like we are now, and poverty rates technically are actually falling. But of course, that's not reflecting the reality for many people, which is that if you're on a low income and you experience just a small fall in your income, that can be disastrous.
Whereas, if you're on a middle income or a high income and your income falls, you may well be able to adjust to that and you might be just fine.
Darren: Okay. We're going into Christmas and a new year. If you could ask the government for one New Year's resolution to help tackle this issue in 2023, what do you think it would be?
Rebecca: Well, I first have a New Year’s wish that we have a really mild rest of winter in January and February. That would be great, especially for those who can't afford to keep the heating on so much.
But no, in terms of a New Year's wish for the government, I think I would wish that there is a bit more openness to this longer-term investment in the social security system. And that we see that over the next few years there is reforms to universal credits so that the basic rate of benefits that people receive is adequate and make sure that they can always afford the essentials like food and heating.
And that when people rely on this because their incomes have dropped, we can be confident that they won't have to be turning to food banks or going cold next winter.
Darren: My thanks to Rebecca McDonald, Chief Economist at the Joseph Rowntree Foundation. I'm now joined by Harriett Baldwin, Chair of the Treasury Committee, and Sir Robert Goodwill, Chair of the Environment, Food and Rural Affairs Committee.
Sir Robert, we've just been hearing from Rebecca McDonald that a big driver for the high cost of our food at the moment is coming from all of the costs that companies have stacking up in producing that food.
And I understand your committee's been talking about this to the sector. What is it that you've been hearing from them?
Sir Robert: Well, we've been hearing that the price of inputs for farmers like myself have been going up dramatically. The price of fertiliser has gone up more than double…[the] price of tractor diesel, price of pesticides.
But of course, it would be a mistake to say that the reason that food prices are going up is because imports are going up, because actually, farmers don't control the price of their outputs. They're set on the world market.
And of course, the situation in Ukraine has meant that the price of wheat, oil seeds, a number of commodities has gone up dramatically. And that of course has fed into the high price of food. But there's no guarantee that we wouldn't see the price of food falling despite the fact these input prices are very high.
The arable sector is actually doing reasonably well because most of them bought their fertiliser before the invasion of Ukraine. But it's had a really bad impact on the pig and poultry sector because they've seen the price of their feed increase. And until recently, they haven't been able to see any increases in the price of their eggs or meat.
Darren: Rebecca was concerned that higher prices might become baked into the system, even if we see the overall rate of inflation starting to come down. Do you share that concern?
Sir Robert: I think that is a real concern and it's all really linked to the price of oil and commodity prices such as the price of wheat.
I mean, we have seen some reductions in wheat prices recently because the pound’s got stronger. So, external factors can impact that. But as I say, there's no reason why that in a year when fertiliser prices are expensive, that we couldn't see the price of cereals drop to pre-invasion levels.
So, farmers are very nervous, and some of them are making decisions now about the crops that they’re putting in the ground next spring. And some of them are planting crops such as legumes that don't require a lot of fertiliser to sort of hedge their bets and to protect themselves from some of these wild fluctuations.
Chicken producers, for example, are not filling up their sheds, we've got Avian Influenza as an additional factor. So, it's all very uncertain and farmers are finding it very difficult to make decisions about the future given that the decisions they make now about putting a crop in the ground this autumn won't actually be coming through until next harvest.
They may not be selling the wheat until this time next year. So, it's a very long-term process and very difficult for farmers to make these decisions.
Darren: And do you think that farmers will start making different decisions to reflect maybe our country's food security needs as well as the kind of cost associated with production? Do we need to see changes about what we produce in the UK?
Sir Robert: Well, one of the key elements of the report that we’re carrying out at the moment is do we need to be more sort of self-sufficient in food?
We produced about sort of 70% of the food that we can produce in our climate. And at the same time, of course, we're seeing pressures put on land for say, tree planting, for carbon sequestration, rewilding, and environmental schemes, which is part of what the government's doing to change the way we support farmers from paying them just to be farmers, in effect under the old common agricultural policy to change that, to paying them for delivering environmental outcomes.
Which in some cases, means land will be taken out of production and put into these environmental schemes. So, we could see production fall at just the time that we probably need to see more food being produced ourselves because of the very volatile situation around the world, particularly obviously in Ukraine.
Darren: And Harriett Baldwin just coming to you, when we discussed this with Joseph Rowntree Foundation in the context of the cost-of-living crisis, it was obvious that the high price of energy and the high price of food, both of those being essential products meant that it was having a bigger impact on lower income families.
And in the autumn statement, the Chancellor announced one-off payments people on means-tested benefits for the next financial year, building on what happened in this financial year.
I understand that your committee, the Treasury Committee, has just published a report on cost-of-living payments. Is this a useful thing for government to do?
Harriett: Well, Darren, you are absolutely right that inflation is just such a pernicious force and it's really a tax on the very poorest in our society, because it's clear that things like the cost of energy and the cost of food are a bigger proportion of household budgets for those on lower incomes.
And one of the things that we do on our committee is we hold the Bank of England Governor to account. They're the independent organisation that's tasked with getting our inflation back in the target range around 2%.
And I think one of the things that we will be hoping they achieve this year is to get us back to that range. You can see how damaging inflation is. And one of the things that we welcome in our report is the fact that the Chancellor at the autumn statement has announced that next winter, households on the lowest incomes will get a £900 support payment.
That's up from £650 this year. But we are worried in our report about the cliff-edge nature of that payment, and we're making the recommendation that it's split into six and paid over six months next winter to avoid that cliff-edge effect of some people not perhaps, qualifying on the day in question.
Darren: And you referred there to Bank of England interest rates. One of the concerns is that families that are struggling to make ends meet are having to put more of their day-to-day costs onto their credit cards, having to look at maybe doorstep loan options or other types of financial products.
And of course, there's been fluctuations in the cost of mortgages recently. And for people who are in rented accommodation paying their landlords mortgages, this is all adding up. It suggested to more debt for people that can't really afford to pay off debt in the long run. Do you have concerns about that?
Harriett: We really do, and we scrutinise the work of the Financial Conduct Authority, which monitors all of those credit providers. As you say, for people on the lowest income, sometimes the interest rate is absolutely extortionate and doorstep lenders can charge ridiculous interest rates.
And they were also shifting to a situation in this country where we've got used to these very low mortgage rates and the Bank of England is going to have to raise rates in order to combat these inflationary pressures. And so, households who have mortgages are going to have to get used to higher mortgage rates than perhaps they've seen for the last 10 years or so.
But it is so important that inflation come back down to that 2% target level. You can see how pernicious it is to those who are the very poorest in society.
Darren: There's a concern about the inequality, I suppose, of the cost of borrowing, where people on lower incomes who maybe have lower credit ratings are having to pay higher interest rates for their borrowing compared to those of us who have higher credit ratings because we generally earn more.
Is there anything in particular that can be done to help that situation?
Harriett: Well, I think that we have in the last few years, brought in more regulation, more scrutiny of some of those high-cost lenders. You'll remember the big Wonga debate about five or six years ago where Parliament made quite a big fuss and the regulator did bring all these organisations into regulation.
So, there's been a lot more regulation. But I think that one of the things I would like to highlight is this household income support fund from the government. In my constituency, it's being administered by the Citizens Advice Bureau.
And I know that they really want it publicised because not everyone knows that there's this billion pounds of extra cash that can be given on a discretionary basis, either by Citizens Advice Bureaus or by councils to help households with those budgeting problems to prevent them from having to go to those high-cost lenders in the first place.
Darren: And Robert Goodwill, one of the ways in which you can pay your bills more easily is if you get paid more.
And we've heard on our podcast that supermarkets, for example, have been able to pay higher wages and that's seen a bit of movement of workers from other jobs, especially in the public sector where the pay rises tend to be being settled at a lower rate than in the private sector.
Your committee's been looking at labour shortages in the sectors that you look at on the EFRA Select Committee. Have you seen this trend as well?
Sir Robert: It's not so much about people moving from low-paid jobs in agriculture to other jobs, for example, in a supermarket.
I think we have a situation that people here in the UK don't seem to want to go and work in those jobs, picking fruit and vegetables in the field, picking sprouts in the frozen fields that people are going to eat at their Christmas lunch in a couple of days’ time.
So, there is a real issue, and that's why we've had to bring in seasonal agriculture workers visas. We've got 30,000 people coming and working in agriculture, and also, people working in slaughterhouses and cutting houses where meat is prepared. It doesn't seem to be a, sort of, job that people in the UK want to do.
And in other cases, it may be that they want to get that work, but they don't live in the area where the agriculture is and it's difficult for them to relocate there.
Sir Robert: So, we've got very high levels of employment here in the UK at the moment, and that really is putting a lot of pressure on some sectors of agriculture. In particular, the meat processing and the sort of handpicking of fruit and vegetables, which we have seen situations where fruit has been rotting in the field.
Also, because our traditional seasonal workers would come from places like Ukraine and Belarus, and of course, they're not coming through. Young men are not allowed to leave that country. We've had to cast the net much wider, even as far as the far east, a place like Tibet where people have been coming in.
So, it's not so much about the wages, it's about the problems we've got incentivising British people, particularly younger people who would maybe in the past, have done these jobs to come and actually work in agriculture on a seasonal basis.
Darren: And Harriett Baldwin, for many people in work, but on low pay, their income is topped up by universal credit payments. And for people that aren't in work, they obviously receive universal credits as well.
There's been some suggestion that the basic rate of benefits is inadequate in the context of the current cost-of-living crisis, but also, the higher prices we're seeing as a consequence of inflation, but possibly for the long-term.
Do you think we're going to need to think about how we change the payments that are made through universal credit, and can the government afford to do that?
Harriett: Well, I'm going to unpack that question because there are a lot of different questions in that one.
Universal Credit has obviously been a really important reform founded on some work that was done under the previous Labour government, and then implemented by the last few governments.
And it's about making sure that if someone takes on an additional hour of work, that that hour of work pays. And that's really important in terms of not allowing people to get trapped in a poverty trap, effectively of relying exclusively on benefits and encouraging people to take on work.
One of the characteristics of the economy at the moment that's unusual is that there're actually more vacancies in the economy than there are people looking for work.
So, you want to be able to enable people to take on that work that they find satisfying and rewarding, but to make sure that it doesn't cost them in terms of the universal credit that they receive. And that the withdrawal rate is linear.
One of the things that's really interesting, I think, in terms of next year, is that the independent Wage Commission has actually recommended that the minimum wage, the national living wage go up by a further almost 10% next April.
So, that will enable people who are in those lower paid jobs to earn a substantial wage increase. And at the same time, in our report, we've highlighted that it's important that the £900 payment next year, not act as a disincentive for people who perhaps would get universal credit plus £1, and would therefore, lose out on £900 pounds.
So, you can see that that would be a really big problem if that's how they're going to construct it. So, we've made recommendations to the treasury to actually smooth the way that that cost-of-living payment next year works.
Darren: Thank you. And this is a question we ask to all of our guests, and this will be the last time we get to ask it on this series of Committee Corridor. So, you’re both on the Committee Corridor and the House of Commons, you get into the lift, no doubt decorated with tinsel ready for Christmas and you happen to bump into the Prime Minister and you've got a quick elevator pitch to him to ask for one thing in 2023 in relation to your priorities on your committees.
What is it that you're going to ask the Prime Minister for? Robert Goodwill, first.
Sir Robert: I think we need some clarity on the switch from the CAP agricultural payments to the new system. There's quite a lot of uncertainty how that's going to be... and what farmers would like to have is a bit of certainty. Particularly [over] the way that some of these environmental schemes are going to be delivered.
I think we lost a couple of years because of the pandemic when the research wasn't done, the pilots weren't done. So, I'd like to see a little bit more clarity how it's going to work to ensure that some of the hard-pressed farmers, particularly the hill farmers who really can't survive without some support from the taxpayer, can actually plug into this money and continue delivering not just healthy food, but also, the environmental aims that we all really want to see.
And the landscape, of course, of the UK, which is just phenomenal, particularly in Yorkshire, of course, where I come from.
Darren: And Harriett Baldwin, please.
Harriett: I think what I would want to ask him is to make sure that from a policy point of view, he doesn't do anything that makes inflation worse. Inflation is just so terrible for people, particularly those on the lowest incomes that we really need to make sure all policy is pointing in the same direction to bring inflation back down to that target 2% level.
Darren: Great. Well, Robert Goodwill, Harriett Baldwin, thanks for joining us.
Harriett: Thanks, Darren.
Sir Robert:Thank you very much indeed.
Darren: And that brings us to the end of our second series of Committee Corridor. We've been considering the cost-of-living crisis.
In the first episode, we set the scene with Torsten Bell from the Resolution Foundation, and we've ended the series with Rebecca McDonald from the Joseph Rowntree Foundation.
In between, we've looked at rising energy bills, jobs in the workforce, securing our energy future and what's happening to our net zero ambitions. Thank you for joining us, and you can find details of all of our past episodes on the UK Parliament website.
We'll be back in the new year with a new series and a new presenter. My best wishes for a happy Christmas, and a more prosperous new year.
I'm Darren Jones, Chair of the House of Commons Business Committee, and you've been listening to Committee Corridor. Thank you for listening.
Further Information
Image: UK Parliament/Tim West