The Cost of Living Crisis
On the 27th October 2022 the UK Trade and Business Commission took evidence on the cost of living crisis, querying if the recent UK Government action had worsened the crisis.
The session took evidence from two panels. The first panel consisted of economic experts who informed the Commission about the wider state of the economy. The second half of the session took evidence from organisations that represent British businesses who described the impact of the cost of living crisis on their membership.
Session one witnesses:
Alfie Stirling, Director of Research and Chief Economist, New Economics Foundation
David Blanchflower, Professor of Economics, Dartmouth College and the University of Stirling
James Smith, Research Director, Resolution Foundation
Frances Coppola, Economic commentator and writer.
Session two witnesses;
Josh Green, Head of Public Affairs. Beer and Pub Association:
Craig Beaumont - Chief of External Affairs, Federation of Small Businesses
Helen Dickinson, CEO, British Retail Consortium
This session was chaired by Hilary Benn MP
Post-Session Report
INTRODUCTION
The session heard evidence on:
• The intertwined and overlapping areas of the UK Government’s ‘Food Strategy’
• Food security
• The impact of trade policy
• The impact of labour policy on production capability
• The rising cost of food
• Declining standards
• Nutrition
Although the Coronavirus pandemic, the war in Ukraine and climate change undoubtedly have an impact on all these issues, the Commission heard that at the very least, Brexit has “put us in a position where we were at a deficit at the outset”. While it is difficult to decouple the interrelated issues from one another, this report outlines the key findings heard throughout the evidence session.
SESSION WITNESSES
ANNA TAYLOR, Executive Director The Food Foundation
JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
PROFESSOR TIMOTHY LANG EMERITUS, Professor of Food Policy, City University London’s Centre for Food Policy
RICHARD GRIFFTHS, Chief Executive British Poultry Council
PHIL HAMBLING, Head of Food and Farming National Farmers’ Union
UK GOVERNMENT’S FOOD STRATEGY
On the 13th June 2022, the UK Government published its Food Strategy, which cites the Coronavirus pandemic and the invasion of Ukraine as key drivers of food insecurity. According to the UK Government, its strategy is in response to the Dimbleby report, and sets out to deliver a prosperous agri-food and seafood sector; as well as securing food supply in an ‘unpredictable’ world.
Further, it outlines an objective to ensure the UK has ‘export opportunities’ as well as ensuring ‘home.grown diets for all’. The reality however, as heard by the UKTBC, is that the UK Government’s post-Brexit policies represent a serious misalignment with this newly proposed Food Strategy.
KEY FINDINGS
1. Misalignment: Witnesses told the UKTBC that current policies, combined with the hard form of Brexit we have, sit in stark contrast to the ambition of the UK Government’s Food Strategy.
2. No mandatory targets: The Food Strategy, without legal basis, sets no mandatory targets and thus has no accountability.
MISALIGNMENT
In response to Paul Blomfield MP’s question as to whether the UK Government’s ambitions and policies align, James Withers of Food and Drink Scotland told the UKTBC “No. I’ve seen policies in contrast of the position, so I would argue that the early foray into trade deals have been, well they look like a disaster to me in terms of our farming industry”.
“Yes, it’s absolutely right that there are a number of major global issues that play into the current situation. But in my view Brexit has created the new baseline, so we were worse off before the other issues really came to the fore. That’s what Brexit has done for us. So, at this point yes, perhaps it’s very difficult to separate out and say X cost of that is Brexit, Y cost is energy, etc. But it certainly put us in a position where we were at a deficit at the outset. Much of our labour issues can be traced back to the effects of Brexit. Much of our cost of trade with the EU can be traced back to Brexit. The imbalance, the asymmetry that Phil has talked about that; that is traced back to Brexit and the ideology of Brexit. Yes, we had problems that have been overcome, yes, I won’t even call them teething problems because they were significantly more than that, yes, those problems have been massively exacerbated by the subsequent issues that are now on our plates, but fundamentally Brexit put us at a disadvantage from the outset. Added cost, added burden, added resource requirement, lower efficiency, lower productivity. So that’s how we started, and it’s only got worse with the subsequent issues.” RICHARD GRIFFTHS Chief Executive British Poultry Council
“I won’t even call them teething problems because they were significantly more than that, yes, those problems have been massively exacerbated by the subsequent issues that are now on our plates, but fundamentally Brexit put us at a disadvantage from the outset. Added cost, added burden, added resource requirement, lower efficiency, lower productivity. So that’s how we started, and it’s only got worse with the subsequent issues.” RICHARD GRIFFTHS Chief Executive British Poultry Council
No mandatory targets
“There is no point having a strategy unless there’s a legal basis to it. We’ve got no mandatory targets. Let me just remind ourselves, the reason climate change is being taken so seriously in Britain is because of the Climate Change Act, which stipulated targets and gave not enough mechanisms actually as a piece of legislation. We need that urgently now in Britain on food. We ought to be having the great failure of the Government’s response to the Dimbleby Report is not to have any legislation at all. The next Government, coalition or whatever, or the next non-hard Brexit Conservative Government must be strongly pushed to have a piece of legislation.” PROFESSOR TIMOTHY LANG EMERITUS Professor of Food Policy, City University London’s Centre for Food Policy
FOOD SECURITY
Food security, as defined by the United Nations’ Committee on World Food Security, “means that all people, at all times, have physical, social, and economic access to sufficient, safe, and nutritious food that meets their food preferences and dietary needs for an active and healthy life”.
However, the evidence given to the UKTBC makes clear that by definition, food security in the UK is at significant risk. While we do not have established indicators of food security, the following sections highlight the multitude of ways in which food security is threatened within the UK.
KEY FINDINGS
1. Complacency: The serious issue of food security in the UK will not be solved by the aims and objectives outlined in the UK Government’s Food Strategy. The UK Government continues to be ‘extraordinarily complacent’ on the issue.
2. Post-Brexit supply chain risk: The current functioning of our supply chains, as a result of post-Brexit issues, is likely to result in further restrictions to the available choice of food in the long term.
3. Social disorder risk: As we have seen elsewhere, the breakdown of food systems and food security may lead to social disorder.
Complacency
“I remain hugely concerned that we are extraordinarily complacent still on food security and there’s almost a kind of arrogance that we are wealthy in the West, we’ll buy our way out of any problems. I’m not convinced that will be the case. I’m not sure that the product will always be there, millions of acres are going to become unproductive as a result of global warming and I think many of the nations that we have traditionally imported from, it may become politically unacceptable for them to export what dwindling supplies that they have to nations like ourselves, no matter what the price is.” JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
Post-Brexit supply chain risk
“There is something happening in the food supply chain at the moment, and particularly the UK retail supply chain which potentially will harm the longer-term choice and availability of products in this country. I am as concerned now as I have been that the current function of the supply chain, which is not I think reflecting the costs of producing food means we could see over the long-term a restriction in availability of choice of what we have on the shelves. And I think that’s a very difficult debate to have because the natural conclusion is food prices have to rise, or at the very least suppliers’ returns have to rise. But if they don’t my worry, is we could lose some of that core processing infrastructure with all the questions of food security that flow from that.” JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
SOCIAL DISORDER RISK
“As we’ve seen from the Arab Spring to the current unrest in Sri Lanka, the quickest way you can start seeing disorder in society is their food systems start to break down. And I am hugely concerned that we are still way too complacent in this country. And perhaps not surprisingly, we’ve gone through four or five generations where it’s unthinkable you wouldn’t walk into a retailer and see it stocked to the rooftops with products from around the world at very low prices. “That era is coming to an end, and it will come to an end quickly and unless we think hard about our own food security, ensuring we have a balance between a good domestic production capability and where we need to source products we simply can’t grow here, I think we can get into desperate trouble pretty quickly’’ JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
DECLINING LIVING STANDARDS & RISING FOOD PRICES
As with energy, the cost of food in the UK continues heard that in reality, the UK Government is failing to to surge. This results in a decline in affordability acknowledge the problems that are both created and of nutritionally dense foods and a restriction of worsened by the impact of Brexit, but is also failing choice. For many, the weekly food shop is becoming to acknowledge the ways in which solutions can be nutritionally inadequate. Regrettably though found within post-Brexit policy to alleviate these predictably, it is once again those living in the poorest critical issues.
Further, the strategy aims to ‘halve households that will be hardest hit. While the UK childhood obesity by 2030’, though as outlined below, Government states in its Food Strategy it recognises the consequences of the cost-of-living crisis will likely the ‘real consequences for people across the country’ result in the contrary. and ‘impact of cost-of-living pressures’, the UKTBC heard that in reality, the UK Government is failing to acknowledge the problems that are both created and worsened by the impact of Brexit, but is also failing to acknowledge the ways in which solutions can be found within post-Brexit policy to alleviate these critical issues. Further, the strategy aims to ‘halve childhood obesity by 2030’, though as outlined below, the consequences of the cost-of-living crisis will likely result in the contrary
KEY FINDINGS
1. Brexit a factor: The UKTBC heard that Brexit is ‘absolutely’ a factor in exacerbating the current cost-of.living crisis.
2. Food prices: While food prices are a visible manifestation of inflation across the supply chain, this is lagging other sectors and we may expect to see this rise further.
3. Household food instability: Households are falling into food instability and security at an alarming rate.
4. Adequate nutrition: The cost of food is having a direct impact on access to nutritionally adequate food and consumer choice. This will likely have damaging consequences for the health of the population for years to come, particularly for those living in low-income households.
BREXIT A FACTOR
“Brexit is absolutely a factor in what is going on and it is exacerbating I think the costs of living crisis and there’s increasing weight of evidence that would justify that position. And we’ve got to quickly get into a sensible more logical discussion as to how we can make the TCA work a little bit more smartly and smoothly and make Brexit just a little less hard and painful than it has been.” JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
“I think that both the cost of energy and indeed people and labour are probably the bigger factors of driving inflation in the food supply chain, but it would also be right and proper to say that I don’t think the complexities of untangling ourselves from the European Union have necessarily helped either.” PHIL HAMBLING, Head of Food and Farming National Farmers’ Union
FOOD PRICES
“Food prices are a very visible manifestation of inflation and they’re visible to every one of us when we go into the shops and certainly it can be a large focus on what the media look at as well as the energy piece. But it’s worth noting that yet again food prices are actually lagging behind the general level of inflation, and have done consistently over the last 10-15 year period… “But now [we see] huge references to 50% increase in pasta and elsewhere, it’s probably those staples now, the meat and the milk and the dairy that are really starting to rise. And those if you like are the kind of non-discretionary items and that’s probably what’s causing the most pressure at the moment.” JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
HOUSEHOLD FOOD INSTABILITY
“Foodbank usage is going up. We’ve been tracking food insecurity; we ask a standard set of questions which are recommended internationally and which the Government uses in its own family resources survey. We’ve been doing surveys since the start of the pandemic, we’ve done ten rounds of surveys, this provides a much more rapid pulse of data to allow us to pick up trends more easily. “We did our most two recent surveys in January and April of this year and we saw in that period, that short period, a 57% increase in food insecurity, so the levels are now higher than they’ve ever been in terms of the recording that we’ve done. Affecting 7.3 million adults and 2.6 million children.” ANNA TAYLOR, Executive Director The Food Foundation
ADEQUATE NUTRITION
“We know from what happened in 2008 people traded down in quality, so they stopped buying as many fruits and vegetables for example, tended to focus in on those really energy dense, cheap foods, which fill up bellies and which require very minimal waste. So, I think it’s really important to understand not just the economic impacts on households and where that might push out expenditure on all other things, anything sort of broader relating to wellbeing and focusing very much on the absolute core essentials. But also, the health implications, the stress of trying to put food on the table when you’ve got very, very little money. But also, what it means in terms of what you’re eating.” ANNA TAYLOR, Executive Director The Food Foundation
“The balance of prices going into this crisis is really problematic for our health and wellbeing. Overall, unhealthy calories are three times cheaper than healthy calories and so when we’re thinking then about the additional effects of inflation and how that balance of prices across the basket is shifting in the context of inflation is really important because we’re coming out of the pandemic with a huge spike in childhood obesity and now rapidly rising levels of food insecurity. So, I think it’s really important to note that the affordability of eating in a way which protects our health is deteriorating very rapidly” ANNA TAYLOR, Executive Director The Food Foundation
IMPACT OF POST-BREXIT POLICY ON PRODUCTION CAPABILITY
The Food Strategy states that the UK will achieve the Workers Scheme, significantly curtails the UK objectives set out in the document by ‘sustainably Government’s aims to increase production and boosting production in sectors where there are manufacturing capability. Indeed, the ability to attract post-Brexit opportunities, including horticulture and the investment required to re-establish a prosperous seafood’. However, evidence given to the UKTBC agricultural sector is limited by our lack of available makes clear that post-Brexit policies, in particular labour. labour policy and the current form of the Seasonal
KEY FINDINGS
1. Post-Brexit labour policy: The effect of post-Brexit labour policy has resulted in an inability to meet demand now and into the future.
2. Seasonal Workers Scheme: The Seasonal Workers Scheme, in its current form, does now allow enough time for businesses to adapt and take advantage of the scheme.
3. Access to people and labour: The single most pressing issue impacting horticulture is access to people and labour.
4. Trade policy: In addition to labour policies, witnesses expressed the need to urgently see a trade policy which recognises the need to grow productive capability for the long term.
5. Border controls: The asymmetry in border controls is limiting the ability of UK producers to extract value from their exported goods.
POST-BREXIT LABOUR POLICY
“I am concerned about our ability to have the workforce in place in order to meet what is growing demand and ultimately meet that food security imperative in time. And we somehow have to find a way of unlocking the Home Office to have a more sensible conversation about all this, because I’ll be honest, we cannot get in the door to have a conversation, a sensible conversation about immigration. I think that would be a massive step forward if Government could start having a real conversation about where we’ve got genuine gaps. Our working age population is dropping, in Scotland, across the UK, we are short of people, and we want to attract talent to well-paid jobs throughout our particular sector. So, it would be nice to start that conversation.” JAMES WITHERS, Chief Executive Officer Food and Drink Scotland
“We’re in a position where we were previously very reliant on nonUK labour, we’re at a point now where I have members who are desperate to invest in new technology, the automation, embrace that side of what the Government says it wants, but we need that interim period where we continue to have access to labour while we make the changes. The Government want us to change like that, we need years of investment programmes to reach that same point. So, there are ways that the Government could support industry, but ultimately if it’s not acknowledging the big problem or the problems that have been created then there’s very little that can realistically be done.” RICHARD GRIFFTHS Chief Executive British Poultry Council
SEASONAL WORKERS SCHEME
“I think the reality is though that the extension of seasonal workers scheme is perhaps taking longer than would be ideal for the food supply chain to be able to adapt. “And I think the importance of seasonal poultry work as well recognised for turkeys for Christmas and I’m sure that Richard will want to speak about is somewhat welcomed, it’s perhaps less than we’ve had previously and indeed we’re concerned that both the tendering process for the labour providers in which the recruitment have to go through will be ending in September which will not give a huge amount of time to be able to recruit and ensure that we have the right people in the right places to be able to process our seasonal poultry. On top of that we certainly wouldn’t have expected that to come out of the allocation or headroom for seasonal workers that have been applied for horticulture.” PHIL HAMBLING, Head of Food and Farming National Farmers’ Union
BORDER CONTROLS
“We have a considerable asymmetry in border controls at the moment which is both unfair for UK producers and in fact is inhibiting some of the points that I made earlier on about fulfilling our export capability, just as much to improve our resilience but also returns. And the very fact that we have additional costs that our competitors have in Europe is problematic because it means that we can’t extract the value of products that we do export and is coming at cost which ultimately comes out of the supply chain supplying the domestic market as well.” PHIL HAMBLING, Head of Food and Farming National Farmers’ Union