Food Price Inflation

George Eustice Excerpts

Thursday 19th May 2022 Commons Chamber

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

(Urgent Question): To ask the Secretary of State for Environment, Food and Rural Affairs to make a statement on food price inflation.

[The Secretary of State for Environment, Food and Rural Affairs (George Eustice)]

The global spike in oil and gas prices has affected the price of agricultural commodities. Agricultural commodity prices have always been closely correlated with energy costs, since gas is used to manufacture fertiliser and fuel energy is needed throughout the food chain. Gas prices were rising as we emerged from the pandemic, but the invasion of Ukraine has caused some additional turbulence in international commodity markets. I have already set out measures to support farmers and growers in England ahead of the coming growing season. Those measures are not a silver bullet, but they will help farmers to manage some of their input costs from fertilisers.

The turbulence of the market has brought into focus again the importance of a resilient global supply chain and the importance to our national resilience of having strong domestic food production. In the UK, we have a high degree of food security. We are largely self-sufficient in wheat production, growing 88% of all the wheat that we need. We are 86% self-sufficient in beef and fully self-sufficient in liquid milk, and we produce more lamb than we consume. We are also close to 100% self-sufficient in poultry. Sectors such as soft fruit have seen a trend towards greater self-sufficiency in recent years because of the extended UK season.

As part of a global market, however, there have been pressures on input costs and prices. As a result of those rising input costs, there are of course also some pressures on households, predominantly as a result of the energy costs. There have also been some rises in food prices in recent months, although the ferocity of retail competition means that price pressures have been contained on certain product lines.

In March, overall food prices rose by 0.2%; the price of fruit actually fell in March by 1.2%. In April, however, food prices rose by 1.5%, which is a faster rise than we have seen in some years. If we look at the price of specific categories of food, in April, bread and cereals rose by 2.2%; sugar, jams and syrups rose by 2%; fish rose by 2%; meat rose by 1.9%; vegetables, including potatoes, rose at a lower level of 1.3%; fruit remained broadly stable; and oils and fats decreased slightly by 1.1%.

The single most important measure of household food security and the affordability of food remains the household food survey that the Department for Environment, Food and Rural Affairs has run for many decades. That shows that, among the poorest 20% of households, the amount spent on food consumption was relatively stable at around 16% of household income between 2008 and 2016. It then fell slightly to 14.5%, but with the recent price pressures, we can expect it to return to those higher levels of around 16% in the year ahead.

We are monitoring the situation. The Government have put in place an unprecedented package of support to help those who need it. That includes targeted cost of living support for households most in need through the household support fund, where the Government are providing an additional £500 million to help households with the cost of essentials.

[Jim McMahon]

I am staggered by that response. The Secretary of State speaks like a commentator or spectator on the sidelines, rather than the person responsible around the Cabinet table for food security. He seems oblivious to the cost of living crisis that people are facing. He can reel off the stats all he wants, but working people know that when they go to the supermarket, the price of almost everything they are buying is going up and up. All the Government do is spectate and commentate from the sidelines.

The Secretary of State says that the Government have made interventions, but to what end? He talks about a fertiliser shortage and an input costs crisis, but there is a fertiliser plant in the north-west that is completely closed and has been since September, and the fertiliser plant in the north-east is running at only 30% capacity. Let us also look at carbon dioxide, the labour shortage and distribution costs, and what they are doing to the cost of food.

Let us then look at the public sector. Bear in mind that the NHS serves 140 million meals a year, schools serve 600 million meals a year and prisons serve 90 million meals a year. Cost inflation has an impact on frontline services as well as on household budgets. For households, that is on top of inflation, on top of energy prices going up, on top of mortgage payments going up, on top of petrol and diesel going up, and on top of taxes going up.

What interventions have the Government actually made in practice? They have told people to ride the bus for the day to keep warm, to try to live off 30p a meal, or to just work that bit harder and they will be fine. Well, let me tell them: the number of working people in poverty is the highest since records began. Sixty-eight per cent. of people in poverty are in work. Working is not a route out of poverty after 12 years of this rotten Government.

I see it in Oldham. People who are coming for food parcels now are not in temporary crisis, but in permanent crisis. They are in debt. They are wearing NHS uniforms, coming to collect food parcels to put food on the table. But let us go from Oldham to Camborne, because I have visited the Secretary of State’s constituency. The food bank there is now giving out 10,000 meals a month—just one food bank in his constituency. It is a constant crisis. Will he commit, even at this late stage, to call an urgent cross-Government, industry and charity commission to get ahead of the food crisis? He knows that, if the Government do not get a grip by Christmas, it is going to be even worse.

[George Eustice]

I am sorry that the hon. Gentleman does not want to hear facts, but the urgent question is about food price inflation and the facts about that do matter. He is the one who wishes to spectate and commentate, rather than dealing with the facts before us. I absolutely acknowledged that food prices are rising, and faster than we have seen in recent years. Indeed, household spending among the poorest 20% may return to the levels it was when his party was last in power. However, it is also the case that, in April, overall food prices rose by 1.5%.

The hon. Gentleman asked about fertiliser prices. Here there has been more positive news this week. Fertiliser prices peaked at about £1,000 per tonne in March. This week they have fallen to about £620 per tonne—it was £290 per tonne a year ago. Farmers are purchasing at that level. He expressed concerns about carbon dioxide supply, but that is a by-product of the manufacture of ammonium nitrate, and now that the main fertiliser plants, including the one at Billingham, have reasonably full order books for the remainder of the summer and are manufacturing and selling ammonium nitrate, we do not foresee a problem when it comes to carbon dioxide.

The hon. Gentleman made a good point, which was that the cause of the pressure on household incomes has been the global spike in gas prices and the corresponding impacts on people’s energy bills—household electricity and gas bills have risen sharply. The Government have put in place some measures to try to mitigate and dampen that, but we have always been clear that we cannot remove the impact altogether. Of course, because people need to buy food every week, when there is pressure on the household budget, an inability to buy food is what they notice first, even if food prices have not changed dramatically from where they were previously.

The hon. Gentleman mentioned those in work. The Government have been very clear about that. Over the years, we have continued to raise the threshold before the lowest earners pay any tax at all and in April this year we increased the new national living wage to £9.50 an hour. Those on the lowest pay will have an additional £1,000 in their pay packets as a result.

Finally, I take this opportunity at the Dispatch Box to praise the work of Don Gardner and local volunteers, whom I meet regularly in my constituency of Camborne and Redruth. We often work in conjunction with them to help to ensure that people visiting that food bank can get access to the benefits and support that they need.

[Andrew Percy (Brigg and Goole) (Con)]

Compared with the last major recession we had under the Labour Government, we have done a great deal to expand provision, including free school meals to post-16 students and to all infant-aged children—something the Labour party never offered. On the issue of community food pantries and food banks, I commend to the Secretary of State the model established by Councillor Anne Handley in Goole, the Two Rivers community pantry and the incredible team of volunteers. They are providing heavily subsidised food to anyone in the town who wants it. We have received support via the Department for Environment, Food and Rural Affairs in the past. Can he assure me that that support will continue for amazing schemes such as the Two Rivers community pantry?

[George Eustice]

My hon. Friend makes an important point. Projects and charities such as that do indeed perform an important role in our country. Often, the strongest part of their role is not just the provision of immediate emergency support, but help for people to get the support that they need to address other issues and challenges they might have in their life, so that they can get things back on track.

[Mr Speaker]

I call the SNP spokesperson.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

The 9% rise in the consumer prices index is the highest since records began, with a quarter of those in the UK resorting to skipping meals. The Governor of the Bank of England has warned of an “apocalyptic” outlook for consumers, with the worst yet to come as inflation looks set to hit 10% by the autumn. Food banks are already struggling to cope as households face unprecedented demands with the cost of living. Food banks themselves are a clear sign that the welfare system is failing: that is why food banks exist. Will the Secretary of State argue in Cabinet for measures such as converting the energy loans into grants, the reintroduction of the universal credit uplift, a reversal of the national insurance hike and an inflationary uplift for all welfare and state pension payments, so that—in 2022, in the UK—we do not have to witness the scandal and shame of people being unable to afford to feed themselves and their children?

[George Eustice]

We have obviously made some changes to the benefits system over the years, in particular the introduction of a tapered reduction in universal credit; it always pays people to work more hours and take on more work. We are in a fortunate position in this country in one way: unemployment rates are very low—the lowest since 1974—with close to 1 million job vacancies, and wages for the lowest-paid have been rising.

[Sir Desmond Swayne (New Forest West) (Con)]

The same price shocks have left Japan and Switzerland with inflation nearer 1%. What difference in monetary policy has protected them and exposed us?

[George Eustice]

The analysis we have done on food price inflation—I would point out to my right hon. Friend that, in the month of April, food prices on average rose by 1.5%—suggests that around three quarters of the price pressures we have seen can be directly attributed to the price of gas and the remainder to other factors, including rising costs of labour as wages rise for the lowest-paid.

[Tony Lloyd (Rochdale) (Lab)]

In my constituency, many people before inflation began to become an issue were already finding it difficult to make ends meet. That is not propaganda; that is a matter of practical reality. Every Member of Parliament knows this about their own constituency. What I looked for from the Secretary of State was some indication that there was action that he and his colleagues in Government were going to take, and there came no answer. What is he going to do to help my constituents, who really are on the breadline?

[George Eustice]

The action that the Chancellor has taken so far was announced earlier this year in the spring statement. It included a £150 rebate on council tax bills, and a £200 rebate on energy bills to dampen and spread the cost of the spike in energy bills. We increased the national living wage in April to £9.50 an hour, and that puts an extra £1,000 in the pockets of the lowest-paid. Obviously, we keep this matter under constant review, as the Chancellor has made clear.

[Holly Mumby-Croft (Scunthorpe) (Con)]

My constituents in Scunthorpe and the surrounding villages well understand the global factors affecting the cost of living and of course food price inflation, but they are worried about what is to come. I know the Government have set out a number of measures, and we are doing a lot. When does my right hon. Friend think we will start to see the effect of those measures at the supermarket till?

--- Later in debate ---

[George Eustice]

The reality, as I have said, is that the changes in global commodity prices are being driven by the high price of gas and energy. As I pointed out earlier, the cost of fertiliser, which is one of the key drivers of those international commodity prices, has now fallen by 40% from its peak in March, and is now running at about £620 a tonne. If fertiliser prices remain at that level, or indeed continue to fall, we are likely to see pressure come off the forward prices of international commodities.

[Barbara Keeley (Worsley and Eccles South) (Lab)]

I want to share with the Secretary of State the experiences of my constituent Rebecca, who is a single mum expecting her second baby soon. She said she reached out to me in “desperation and fear”,

and she told me:

“The cost of living has shot through the roof, it is unaffordable and I am having to make some pretty desperate decisions. My weekly shop amount has already jumped from under £50 per week to £75 a week… I am finding it virtually impossible to buy the necessary equipment for my baby’s impending arrival.”

How can the Secretary of State expect Rebecca and millions like her to struggle with tax increases and soaring inflation with no additional support? What is he going to do and what are the Government going to do to ease this pressure on families, which Rebecca tells me is now making her “fearful for the future”?

[George Eustice]

As I acknowledged in the statement, it is undoubtable that rising energy bills have affected household incomes, because people are paying more money on their gas and electric. Food prices have indeed risen—but across the year, with the rate currently at about 6.5%. Of course, we all have constituents with such challenges in their lives, and we all work with them. The Government have put in place the household support fund specifically to help those who fall between the cracks and cannot get support elsewhere, and we have doubled the size of that fund.

[Richard Fuller (North East Bedfordshire) (Con)]

In tackling the global pressures behind surging inflation—US monetary policy tightening, the increase in raw material prices and the conflict in Ukraine—my constituents prefer the Government’s considered approach to the knee-jerk reaction of the Opposition. The key aspect that is beneficial to most families is to put more money into their pockets through tax cuts. Will my right hon. Friend work with the Chancellor and the Prime Minister to see what room there is for tax cuts as part of our response?

[George Eustice]

These matters are regularly discussed in Cabinet, but it is perhaps best that I do not go further at this particular stage.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

I remind the House of my entry in the Register of Members’ Financial Interests.

Any fair-minded person can see that international factors are clearly at play, over which no Minister can have total control, but we can control the support that we give to our domestic food producers. Is this not the moment to do as the National Farmers Union has asked of the Secretary of State and pause the Department’s programme of basic payment cuts to farmers? They will see their payments cut this year by 25%, next year by 30% and the year after by 50%.

[George Eustice]

The Government pledged to keep spending on agriculture in cash terms the same year after year in this Parliament, and that is precisely what we are doing. The right hon. Member is correct: we are phasing out the subsidy on landownership that meant that 50% of the budget went to 10% of the wealthiest landowners in the country and replacing it with a more logical approach that is about supporting the things that farmers do for the environment. Our sustainable farming incentive in England will deliver that by helping farmers with the cost of alternatives to fertiliser to chart their course. Of course, it is for Scotland and the Scottish Government to decide what they want to do in that regard, but we have a programme that is supporting farmers in England.

[Fay Jones (Brecon and Radnorshire) (Con)]

It is clear that food prices are up at the supermarket tills, but I am not clear about whether they are also up at the farm gate. Farmers in my constituency are being hit twice, because food is also more expensive to produce. Will my right hon. Friend confirm that he will continue to work closely with the retailers to ensure that, during this period of pressure, they give fair contracts and have good relationships with their suppliers?

[George Eustice]

My hon. Friend raises a fair point, but I point out that the farm-gate price of milk has risen by close to 30% so far this year, the price of lamb is at record levels, having just gone above £6 a kilo at the farm gate, and the same is true for beef. The price of cereals has doubled. The price of pork is also rising, partly because poultry and pork contracts tend to be linked to the cost of production. So farm-gate prices are also rising, but we recognise that farmers also have higher input costs.

[Nick Smith (Blaenau Gwent) (Lab)]

The Government are at sixes and sevens on how to respond to the cost of living crisis. No. 10 is saying that Labour’s windfall tax idea is ideologically unconservative, although, of course, Margaret Thatcher had one. Will the Secretary of State go back to the Chancellor and demand a windfall tax to support families across our country?

[George Eustice]

The Chancellor is very familiar with all the arguments around the policy that the hon. Member mentions. I would simply say this: the Treasury is rightly concerned that, in an inflationary environment when prices are rising, we must be careful about borrowing and throwing more money at that or even increasing public spending in a way that could exacerbate the problem, so it is a difficult line to tread. That is what the Chancellor is considering as he looks at this issue.

[Duncan Baker (North Norfolk) (Con)]

Food prices going up around the country has a particular impact in my constituency, which has the oldest demographic in the country. Pensioners are worried not only about rising food prices but about the value of their pensions. Between March 2021 and March 2022, food prices went up by 6%. What conversations has the Secretary of State had with the Chancellor, so that there is an absolute cast-iron guarantee that the triple lock will return next year to help my pensioners who are struggling with food costs and the cost of living?

[George Eustice]

Mr Speaker, given the nature of these questions, I almost feel that this urgent question should have been taken by the Chancellor. I am sure that my right hon. Friend the Chancellor is well aware of the arguments that my hon. Friend makes. A decision was taken to change the triple lock temporarily, for reasons we all understand, with very rapidly rising incomes. That is a matter for the Chancellor to deal with in a future statement in this House.

[Mr Speaker]

Maybe the Minister will be the next Chancellor after a reshuffle, given these questions.

[Joanna Cherry (Edinburgh South West) (SNP)]

Recently, I caught up with staff and volunteers at the community one-stop shop in Broomhouse in my constituency. They are doing a great job, but their food bank and their community pantry is hugely oversubscribed. It has become a bit fashionable in here to laud food banks. These sorts of schemes help to feed families and give dignity to users, but they really should not be necessary in a society where so many companies are enjoying the benefits of huge windfall profits caused by the same factors that have led to some of the increases in food prices. I hear what the Secretary of State says about not being the Chancellor, but will he use his position in Cabinet to urge that those windfall profits are taxed so that the money can be used to help people like my constituents, many of whom are working hard—employment is not the answer; this is about in-work poverty—and many of whom have received cuts to their benefits?

[George Eustice]

Specifically on food banks, the area for which the Department for Environment, Food and Rural Affairs has responsibility is through supporting projects such as FareShare and other food charities which play an incredibly important role in supporting food banks to ensure they have supplies. I think I dealt earlier with the second issue that the hon. and learned Lady mentions, which really is a matter for the Chancellor at a future date.

[Alexander Stafford (Rother Valley) (Con)]

Ukraine is known as the bread basket of Europe and the world. It is one of the largest exporters of wheat, grains, oils and barley. On average, it exports between 4 million and 5 million tonnes of grain each month. At the moment, it is exporting only a couple of hundred thousand tonnes of grain and that is having a huge impact on food prices in England and on inflation across the world. What are the Government doing to increase the homegrown production of foods and help to secure more routes into the country for grain in order to lower prices?

[George Eustice]

My hon. Friend raises an important point. Ukraine is a very large producer and in particular it is the world’s biggest producer of sunflower oil, which is the principal agricultural commodity we were importing from Ukraine. On cereals, Ukraine accounts for around 9% of wheat exports, a lower percentage of global production. In answer to his question, as I said in my statement we have a very high level of food security in this country, with high levels of self-sufficiency in wheat, producing 88% of the wheat we need. Of course, we are also mindful of the impacts on other countries around the world, in particular those in north Africa that import significant quantities from Ukraine.

[John McDonnell (Hayes and Harlington) (Lab)]

In crises on this scale, Governments of all complexions, Conservative and Labour, have looked at ensuring people have the resources coming in so that they can afford basic foods. At the moment that means inflation-proofing benefits, pensions and wages, but they have also looked at price controls. The Government are looking at price controls for energy. Will they now look at price controls on a basketful of basic food stuffs, so that we do not see what we have seen in recent surveys, which is people actually now on the edge of hunger?

[George Eustice]

I would simply point out that the ferocity of retail competition in this country at the moment means that two of the big companies, Sainsbury’s and Tesco, are in a price match war with Aldi. That will actually do far more to constrain prices in some of those categories—not all, but in some of them—than any regulation the Government can bring in. I would point out that the last time we saw a spike in food prices of this size, with household spending on food exceeding where it is today, was 2008. The Labour party did not choose at that point to introduce price controls.

[Bob Blackman (Harrow East) (Con)]

My right hon. Friend has set out for the House the complications involved in price rises of food and other substances, and supply is clearly one of those. Will he therefore take action to encourage our farmers to produce more, and then make sure that our supermarkets pass on the profits they make to farmers to encourage them to grow and develop more product?

[George Eustice]

Confidence among farmers to sow next year’s winter wheat crop and to continue to put down flocks of broiler chicken and so on really does matter. In the case of poultry and pigs, many of the contractual arrangements automatically pass on some of the costs—for instance, the costs of feed. With fertiliser prices easing down, I think we will see confidence returning, but my hon. Friend is absolutely right. In England we have chosen to bring forward 50% of the annual subsidy payment to July this year to help farmers with cash flow during a difficult time.

[Dame Diana Johnson (Kingston upon Hull North) (Lab)]

Dennis Woods from Unity in Community in north Hull told me last week that demand at its food bank is soaring. This is a left-behind community, so donations are suffering, and every week the food bank’s stock is cleaned out. It seems to me that things will only get worse, so given that the Government are combining 1970s stagflation with attitudes from the 1870s about the working poor, what exactly will they do to help people in my constituency who are suffering from hunger and who cannot put food on their table?

[George Eustice]

As I said, we have doubled the funding in the household support fund, putting an extra £500 million into it to help the right hon. Member’s constituents and others. We also support food banks through projects such as FareShare.

[Ben Lake (Ceredigion) (PC)]

The Secretary of State may be aware that in Wales a policy of providing free school meals to all primary school children is being progressed thanks to an agreement between Plaid Cymru and the Welsh Government. Will he speak with colleagues in the Treasury about potentially uprating the public sector budget so that that important provision is not affected by rising food prices?

[George Eustice]

These matters are often covered in the Barnett formula and the complexities of Treasury settlements with the devolved Administrations, so I advise the hon. Gentleman to write to the Chancellor or the Secretary of State for Wales to raise his issue.

[Stephanie Peacock (Barnsley East) (Lab)]

The Governor of the Bank of England has described food inflation as “apocalyptic”. Instead of telling people to work harder, buy cheaper or cook better, why do the Government not think again about raising national insurance, cutting universal credit and putting a windfall tax on the oil companies?

[George Eustice]

Again, these are matters for the Chancellor, but I would simply say that, as we emerge from this pandemic, there are challenges—challenges to global supply chains, challenges to the global economy and, domestically, challenges to our NHS. The NHS has had two years of wrestling with the pandemic, and it now has a backlog in some areas that it needs to get on top of. The national insurance rise and social care levy that we have put in place will bring in the resources that will help the NHS to get back on its feet after the pandemic.

[Ian Mearns (Gateshead) (Lab)]

In my constituency, hunger, poverty and malnutrition are not abstract concepts. Food bank demand is through the roof, and many food banks can no longer cope with demand as donations are squeezed from the very communities that need their services. The Secretary of State can robotically repeat what the Government have done and how much they have spent—only once—but the simple, sad fact is that it is just not enough. Many of my constituents are going hungry in one of the richest economies in the world—here and now in the 21st century. We need some urgency and some action, Secretary of State.

[George Eustice]

The Chancellor acted with urgency in his spring statement to increase spending on the household food budget, to increase the national living wage and to put in place easements on council tax and energy bills.

[Rachael Maskell (York Central) (Lab/Co-op)]

When my constituent goes to Collective Sharehouse, she has to select items that do not need to be cooked, because she cannot afford to cook any food. She is therefore not getting a balanced diet, and we are going to see inequality grow not only economically but in terms of health outcomes. Will the Secretary of State go back to the Cabinet and speak to the Secretary of State for Work and Pensions to ensure that we see a proper increase, in line with inflation, in people’s social security and pensions so that they can eat?

[George Eustice]

As I said, we recognise that the single biggest driver of pressure on household incomes has been rises in gas and electricity bills. That is why the Government have focused their attention on those areas. My right hon. Friend the Secretary of State for Work and Pensions obviously keeps under open review the approach and the support that we give people, but we should recognise that there are around 1 million job vacancies in this country, with unemployment at the lowest level ever. We want to support people into high-paid work.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

As the campaigner Jack Monroe has highlighted, and as Newcastle’s West End food bank sees in practice, the cruel truth is that the poorer you are, the higher the rate of inflation you face and the fewer choices you have. But the Government have choices, and my constituents are amazed and disgusted at the choices they make to protect windfall profits rather than working people. Why does the Secretary of State think it should be the poorest who pay the price of inflation?

[George Eustice]

I reject the hon. Lady’s caricature. This Government increased the national living wage to £9.50 an hour and have consistently raised tax thresholds so that the poorest do not pay tax at all. This Government and this Chancellor have put in place a package of measures to help those on the lowest incomes.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

None of us came into this place thinking that we would see a day when children went to bed with no food in their tummy and no heat in their home. I know the Secretary of State to be an honourable man, but today’s statement does not show an understanding that this is a national and global emergency just like covid. There should be a Cabinet-level group—it could always be all-party—because this crisis is not going to go away. People are going to starve in this country and worldwide. We should have a programme to grow more, not just for us but for the whole world. Please, Minister, go back to the Cabinet, shake No. 10 up and get this moving.

[George Eustice]

Our domestic production of food is crucial to our national resilience and plays an important role in our overall food security, as do open markets around the world. We will be setting out a food strategy in June that will deal with many of these issues and will set out our ambition to expand agricultural output.

[Jim Shannon (Strangford) (DUP)]

I thank the Secretary of State very much for his answers to the questions—he is obviously over his subject matter. In my constituency, milk went up by 25p in one week and since March of last year the price has risen by more than 25%. That is only one of the cupboard staples, and an essential element for future health. What steps can the Secretary of State take with regional counterparts to bring down prices and ensure that the farmer is supported and helped? Will he bring to the ears and attention of the Chancellor the need to halt the plastic packaging tax, which has increased production prices for dairymen across all the United Kingdom of Great Britain and Northern Ireland?

[George Eustice]

There have been so many questions for the Chancellor that I am sure by now he has tuned in and is listening to proceedings. In answer to the initial part of the hon. Gentleman’s question, the Government are removing the tariff that was introduced on United States feed maize so that we can reduce some of the input costs, particularly for the pig and poultry sector. That will also benefit dairy farmers.

[Mr Speaker]

I thank the acting Chancellor for that. Let us move on to business questions.