Not all inflation is bad. Current inflation is terrible.

Inflation is the persistent increase in prices of consumer goods and services.

Put another way, it is the decline in value of a single unit of currency. The higher inflation is, the less you can get for a pound. Sometimes prices actually go down – deflation – but this is rare.

Inflation sounds bad, but things are more complicated than that.

If wages are rising faster than inflation, then real-terms consumer prices are effectively falling, which is usually good news.

The overall inflation rate can be high, but this might reflect price spikes in certain parts of the economy. If the cost of Ferraris and yachts are rocketing, then the effect of inflation is simply to make luxury goods slightly less attainable for the ultrawealthy – whereas if the cost of bread and milk is shooting up, that is bad news for anyone who lives in poverty or close to it.

This means that the granular details of inflation are just as important as the bottom-line figure. The effect on people’s lives is about where price rises fall as much as it is about the overall inflation rate.

Last week it was announced that inflation in the UK has risen to 5.4%, up from 5.1% the previous month. According to the Joseph Rowntree Foundation, “the biggest contribution to the rise… is food, something that makes up a larger proportion of a low-income household's expenditure.”

So, inflation is not, by itself, a bad thing. However, current inflation is very high, wages are stagnant, social security has been cut, and price rises are focused on food. That sounds bad.

However, thanks to the amazing work of Jack Monroe, it looks like the current granular distribution of inflation is actually worse than things first appear.

Jack Monroe

Ms Monroe is woman who previously used foodbanks to feed herself and her child, who later wrote some successful budget cookbooks, and who has written for national newspapers.

Last Wednesday, she took to Twitter to say: “Woke up this morning to the radio talking about the cost of living rising a further 5%. It infuriates me the index that they use for this calculation, which grossly underestimates the real cost of inflation as it happens to people with the least. Allow me to briefly explain.”

And explain she did:

“This time last year, the cheapest pasta in my local supermarket (one of the Big Four), was 29p for 500g. Today it’s 70p. That’s a 141% price increase as it hits the poorest and most vulnerable households.

“This time last year, the cheapest rice at the same supermarket was 45p for a kilogram bag. Today it’s £1 for 500g. That’s a 344% price increase… Baked beans: were 22p, now 32p. A 45% price increase year on year. Canned spaghetti. Was 13p, now 35p. A price increase of 169%.”

The examples kept coming. Bread up by 29%; curry sauce up 196%; apples 51%; peanut butter 142%.

“Mushrooms were 59p for 400g. They’re now 57p for 250g. A price increase of 56%. (This practise, of making products smaller while keeping them the same price, is known in the retail industry as ‘shrinkflation’ and its insidious as hell because it’s harder to immediately spot.)

“These are just the ones that I know off the top of my head - there will be many many more examples! When I started writing my recipe blog ten years ago, I could feed myself and my son on £10 a week. (I’ll find the original shopping list later and price it up for today’s prices.)

“The system by which we measure the impact of inflation is fundamentally flawed - it completely ignores the reality and the REAL price rises for people on minimum wages, zero hour contracts, food bank clients, and millions more.”

Inflation conflation

The systemic problem highlighted by Ms Monroe is about granularity. Or, rather, the limits on the granularity of the UK’s official inflationary figures.

Inflation is 5.4%, and much higher than wage growth.

We already knew that lower-income houses were bearing the brunt of inflationary costs because of huge rises in energy prices, which can place a terrible strain on people in or near the poverty line.

According to Joseph Rowntree Foundation research: “[H]ouseholds on low incomes will be spending on average 18% of their income after housing costs on energy bills after April. For single adult households on low incomes this rises to a shocking 54%, an increase of 21 percentage points since 2019/20.

“While there is little difference in the overall increase in bills from April, with all households facing an immediate increase of between around 40% and 47%, the difference in the proportion of household incomes these increases will represent is stark. Middle-income households will be spending on average 6% of their incomes on energy bills, and no more than 8% for any family type considered…

“Around 1.8 million children are growing up in very deep poverty, meaning the household’s income is so low that it is completely inadequate to cover the basics. [2] This represents an increase of half a million children between 2011-12 and 2019-20…

“People living in deep and persistent poverty were already under constant pressure trying to afford food, bills and other essentials. With the impact of rising energy bills expected to be much harsher for families on low incomes, there is a clear case for targeted protections to prevent serious hardship once the energy price cap is lifted.

“Following a cut to Universal Credit in the autumn, the level of support for people who are unable to work or looking for work remains profoundly inadequate.”

It is easier to get into the fine details about energy costs than it is to properly assess the granular impact of food price rises.

This is because, to truly understand what is happening with food costs, you have to go into shops and look at the lowest-possible prices of the basics, and how they compare with the equivalent costs of a year ago (or however long you want to scale your comparison).

Ms Monroe has done this. It has highlighted just how difficult things are getting for low-income houses. And, in the process, she may have fundamentally changed how the UK examines inflation.

Something better

Commander Samuel Vimes is a recurring character in Terry Pratchett’s series of Discworld novels. He has been mentioned in Scope before, in an article about how poverty is a trap, because of his Boots Theory of Socioeconomic Unfairness (which lays out why being poor is expensive).

Since her series of tweets, Ms Monroe has been involved in a media whirlwind (in a good way), speaking with broadcasters, newspapers and magazines of every stripe about how the granular details of price changes are extremely important.

As well as doing media, she is also establishing the Vimes Boots Index, an ongoing tracker of the price of goods in major shops.

People don’t buy some abstract concept of food, they buy a specific box of teabags or a specific loaf of bread, at specific prices. Changes over time in those specific prices are what will effect that individual’s weekly spend on food. Therein lies the theoretical strength of the Boots Index.

Ms Monroe has asked for help from ordinary people, while major organisations involved in food, food pricing and food poverty have also stepped forward.

Following a meeting with Ms Monroe, the ONS announced that they will change the way they collect and report on food prices and inflation to take into consideration household income and other circumstances.

Altogether, this could be a major step forward for the UK. It could bring major changes that truly help people and families in the most need.

Because, inflation is about granularity. Saying that the UK’s inflation has risen to 5.4% sounds very important, but on its own that figure doesn’t mean very much. Like most if not all economic indicators, inflation is only useful because of what it tells us about people’s lives and the challenges they face.

The Vimes Boots Index – if it all comes together – will be a step forward in understanding poverty in the UK.

As Ms Monroe herself says: “What started as a grouchy tweet from my bed (yes, my bed!) has turned into something that, if we pull it off, could be a genuinely useful resource for all kinds of things. And mostly for documenting the heaviest financial injustices that those with the least are forced to bear.

“I’m absolutely astounded at the level of support this has had - from big names and from individuals contributing their receipts - thankyou everyone! I’ll do my best to do this really well. May need more coffee. (Was 89p, now £1.24, an increase of 39%).”