The latest consumer price index figures confirm that inflationary pressures are easing, at least to some extent. The annual increase in the consumer price index fell to 7.8 per cent in January from 8.2 per cent the previous month. It is the third month in a row in which the rate has fallen and further declines can be anticipated in the months ahead.
The figures also confirm that it is the essential goods on which lower income groups spend the highest proportion of their cash which remain worst affected . Energy price inflation is easing significantly , but electricity prices are 63 per cent higher than a year earlier and gas prices are up 86 per cent. Food prices, meanwhile, are 12.8 per cent ahead of January 2022. Even if inflation eases further, these high prices levels will remain .
The Central Statistics Office also published a breakdown of the cash increases of a range of selected goods and services – the price of a white sliced pan is up 27 cent, two litres of milk is up 50 cent and a pound of butter has risen by 73 cent. These all add up to a big increase in grocery bills – unwelcome for the better off but a big problem for those on fixed incomes, or lower earning families who are struggling to make ends meet.
As the Government considers its next cost-of-living package, the key issue is clear. Households were supported by a range of once-off payments after the budget. But the once-off welfare, child-benefit and pension payments were made last year and the last of the ¤200 electricity credits is due next month. Permanent welfare and tax measures were also introduced, but more is needed to cushion the blow.
Ministers now must decide where cash should be spent. There is a clear case to focus most on those who need it, largely via welfare supports. Targeting the so-called squeezed middle is more difficult and the Government may try to do this through a fresh round of universal measures. The problem is that as well as giving cash to those who need, these also provide a bonus to those who have enough income or savings to cushion them from higher prices.