Food Price Inflation

Jim McMahon 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.