Food Price Inflation

Lord Benyon Excerpts

Thursday 19th May 2022 Lords Chamber

[The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)]

My Lords, with the leave of the House, I shall repeat an Answer to an Urgent Question in the other place from my right honourable friend the Environment Secretary:

“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, with an 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 about 1.5%, which is a faster rise than we have seen in some years. On specific categories of food in April, bread and cereals rose by 2.2%; sugar, jams and syrups rose by 2%; the price of fish rose by 2%; and meat rose by 1.9%. Vegetables, including potatoes, rose at a lower level of 1.3%, and fruit remained broadly stable. The price of oils and fats decreased slightly in April by 1.1%.

The single most important measure of household food security and the affordability of food remains the household food survey that Defra has run for many decades. That shows that, among the poorest 20% of households, consumption on food 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.”

[Baroness Hayman of Ullock (Lab)]

My Lords, there is no doubt that global events, including increased oil and gas prices, are contributing to both food and other forms of inflation. However, the Government’s response is clearly insufficient, with even the head of the CBI claiming that there is a moral imperative for the Chancellor to prevent households having to skip meals. The Secretary of State may feel that a few percentage points on food prices is a cause for concern. Does the Minister acknowledge that more than 2 million adults in the UK have gone without food for a whole day in the past month because they cannot afford to eat? Defra’s various schemes to support domestic producers are welcome, but when will the Government wake up to the situation and use an emergency Budget to put in place the support that families need right now to get through this difficult period?

[Lord Benyon (Con)]

My Lords, as announced in the very recent Spring Budget, the Government are providing an additional £500 million to help households with the cost of household essentials from last month. That is on top of what we have already provided since October last year, bringing the total funding of this support to £1 billion. We have also increased the minimum wage to £9.50; we have announced a rebate on council tax; we have announced a rebate on energy bills; and, in England, £421 million will be provided to extend the existing household support fund. A lot is being done. I absolutely share the noble Baroness’s concern for those households that are in difficulty. The Government are monitoring this at every stage that they can and will continue to respond accordingly.

[Lord Howell of Guildford (Con)]

My Lords, there are not many forces working on food prices, but I think that it is generally agreed that soaring international prices for oil and gas are one of the main drivers. There seems to be a resigned view among Ministers that there is nothing much that we can do about this. That is not correct. Our ports at the moment are jammed with frozen gas ships ready to deliver gas into the system and bearing down on all gas prices, which ought to benefit consumers. Internationally, there is substantial spare capacity in oil production; if we have the right diplomatic initiatives and work with others, we can get that going as well. Both these things would have a far bigger effect on reducing the inflation of energy and food than any other single measure. Can the Minister encourage his colleagues in the Foreign Office to get on and focus on this major and central issue?

[Lord Benyon (Con)]

My noble friend is absolutely right that it is crucial that we create more stability and coherence in international supply chains. That is of course massively important in terms of energy. We are working with other countries; indeed, we very much took the lead in working with the World Bank to create an unprecedented amount of money to support those countries that depend in particular on food from countries from which we do not import much, such as Ukraine and Russia. It is about making sure that we ease those supply chains, right across the globe.

[Lord Bilimoria (CB)]

My Lords, yesterday, the CBI, of which I am president, had Ambassador Vadym Prystaiko at our annual dinner. He spoke movingly and explained that, at the moment, it would take five years to get the grain out of Ukraine using rail and road, unless the ports are unblocked. What can the Government do to lead the way in international efforts to unblock Odessa port so that the grain can get out? Otherwise, we have the danger of famine around the world. Secondly, with regard to what the Bank of England governor referred to as an “apocalyptic” rise in food prices, surely the best way to address that is to reduce taxes, which are at the highest level in 70 years. Consumers and businesses need help now.

[Lord Benyon (Con)]

To the noble Lord’s point about Odessa and getting grain out of Ukraine and on to the world market, it is of course a war zone. While this war ebbs and flows, there may be opportunities for the international community to get involved in precisely what he rightly points out is important. We do not know. However, I can assure him that we are working extremely hard with other countries and the Government of Ukraine to try to achieve this. There was talk earlier about trying to find some sort of land bridge to get some of this produce on to the world market, but that is more difficult. On his last point, of course the Chancellor deals with fiscal matters, but I point out that we have increased the threshold below which people pay income tax, which directly impacts many people on low or modest incomes. It is those sorts of things that have much more impact on household incomes than some of the suggestions that we have had to date.

[Baroness McIntosh of Pickering (Con)]

My Lords, does my noble friend share my concern that fruit and vegetable prices may increase because there are no Ukrainian workers coming over? How advanced is the scheme that my noble friend is looking at to bring Ukrainian women and their families over, and would it not be a wonderful idea to accommodate them at RAF Linton, which has family accommodation for both the women and their children?

[Lord Benyon (Con)]

I am not aware of the details of that last point, but we are working very closely with the sector. Our information is that there are concerns, but it is thought that they are containable and that the fruit and vegetables will be harvested and available for our domestic market. I assure my noble friend that we are monitoring this daily with the industry to make sure that we are getting this right.

[Baroness Thornhill (LD)]

My Lords, this is indeed a very weighty and wicked issue. In this House, it behoves us to focus down on the harsh realities of the impact of rising food prices. I do not know whether noble Lords saw this yesterday, but I was shocked to hear the BBC reporting on the shrinking of school meals as food prices rise. Children who are on free meals are, by definition, the poorest in the country. Can the Government guarantee that the inflation of food prices will not see these children suffer even more? They deserve at least one square meal a day.

[Lord Benyon (Con)]

There are very defined standards on school meals and I would want to know more details about how or why they are nutritionally deteriorating in the cases mentioned in that report—I did not see it myself. I can assure the noble Baroness that, yes, of course, rising food prices have an impact on the public sector. Millions of meals are served every day in the National Health Service, in old people’s homes, in prisons and in the Ministry of Defence, so the Government are feeling this as well. It is important that our most vulnerable people, particularly children on free school meals, are getting not just that meal but also one that is nutritious and health-giving.

[The Lord Bishop of St Albans]

My Lords, I thank the Minister for his replies on this important area, but is he concerned, as a number of people are, that some farmland is now being taken out of production because it is being bought by companies for carbon offset? Indeed, one of the issues about some of the rewilding is that, sometimes, good farmland, which could help us, is now not available. What are Her Majesty’s Government doing to increase our food production, both for our own security but also so we can export to help those other countries that are facing huge hikes in prices?

[Lord Benyon (Con)]

Rewilding Britain is the campaigning organisation promoting rewilding and I think it has a target of 5% of the United Kingdom by the end of this century, which will not have an impact on food prices. It will, because of the change in the way we are supporting farmers, be bits of land that most farms can make available for ecological use rather than food production, without at all impacting on the food we eat. However, the right reverend Prelate raises a very important point about the way that some of the trillions of dollars of so-called ESG money is being spent in certain areas. The Government are taking this very seriously, because the S in ESG matters; the social dimension of how this money is spent, in what is called green finance, is really important. We need to protect our food security in the future and we are looking at this—not just ourselves in England but working with the devolved Governments to make sure that ESG money is being spent in a way that is honest, is not greenwash and does not curtail our ability to continue to feed ourselves.

[Lord Berkeley (Lab)]

My Lords, the Statement said nothing about Ukraine, although other noble Lords have mentioned it. Is the Minister not aware that the production of corn, fertiliser and oil from Ukraine is a very significant part of world production? Is that not going to affect not only prices and availability here, but maybe a greater movement towards famine in other parts of the world? I think many noble Lords agree that it is very unlikely that the material will be got out of Ukraine in the volumes necessary unless the ports get opened—which they probably will not.

--- Later in debate ---

[Lord Benyon (Con)]

I am sorry that the noble Lord missed my reference to Ukraine, which underpinned the whole basis of this Question, because I did mention it and it is fundamental. He is absolutely right that it does have an effect, not so much on this country in terms of the wheat we use—because we produce 88% of what we need and the remainder is imported mainly from countries such as Canada, with which there is no problem—but in the fact that this is a massive global issue. That is why Britain, for example, has led, with the World Bank, on getting $180 billion going to those countries that now face real difficulties. We heard earlier about what India has done as a result of its heat difficulties. We are very concerned about the global marketplace and the ability of some vulnerable countries to cope; that is why we are working with international bodies to help solve this.