Following the publication of recent statistics showing that UK inflation has slowed, Stephen Hunsaker runs the rule over what inflation actually means to voters and the ‘human-felt’ economy.
Rishi Sunak might have wanted to pop open a Mexican Coke after hearing the latest inflation figures for May, which showed prices rising at a rate of only 2%, in line with the target set by the Bank of England.
Yet, while that might sound like a feel-good story, it shouldn’t. For the average voter, the fact that prices are still rising, only somewhat less steeply than before, is not a cause for celebration. So, while the rate of inflation might have slowed, the average voter isn’t thinking about prices being pretty similar today to those of a year ago, they are instead thinking about how much they used to pay back in 2020.
Autor: Stephen Hunsaker, researcher
UK in a Changing Europe is an academic think tank providing impartial, research-based analysis of the critical issues facing the UK. Funded by UK Research and Innovation (UKRI) and hosted by King’s College London.
Let’s dig a little deeper into that, using the unofficial national measure of inflation: a pint of lager. According to the ONS, the average pint of lager in the UK in March 2020 cost £3.75. In May 2024, that was £4.77, a 21% increase. Sure, from May 2023 to 2024 the price of a pint only increased by 4%, but the government has a problem if anyone can still remember in a not-so-distant past paying under £4 instead of nearly £5.
As every voter is keenly aware, this issue isn’t exclusive to a pint. The price of food rose around 25% between January 2022 and January 2024. In the ten years before that, it only rose by 9%. Most voters may not know that 25% figure, but they are well aware that their weekly grocery shop has become noticeably more expensive. And that goes for not just food: Consumer Prices Index (CPI) inflation – a measure based on a range of goods and services used by the typical household – rose by 22% from May 2020 to May 2024.
So, when politicians, like Rishi Sunak, try and campaign (or call elections) on inflation having risen at a slower rate than the year prior, and think that voters will thank them, they are liable to discover they are gravely mistaken.
In a YouGov poll in April 2024, 77% of Britons said they understand well what inflation means, yet only 52% were able to correctly identify its meaning. While 30% think that when the rate of inflation falls it means that prices are falling. Therefore, when they go to their supermarket and see that isn’t the reality, they are likely to feel hoodwinked.
Now, what that politician might want to explain to that disgruntled voter, is that their wages have also gone up during that period. From February 2020 to April 2024, average pre-tax total weekly earnings increased from £546 to £687. That is an increase of 20%. However, in real terms (i.e. how much those earnings are worth in relation to the price of goods and services), it was only in the second half of 2023 that wages grew faster than inflation, while real wage growth over the last three years is down 1%.
What that politician is missing, though, is that most people do not see wage increases as an adjustment for inflation but as a reward for performance. That means, following a pay rise, they expect to be able to buy more with their earnings than before.
If wages rise only at the level of inflation, as has been the case for the decade, with a rolling average growth of 1%, workers feel poorer because they cannot buy more even though they are earning more.
This idea can be summed up as the human-felt economy. Politicians and economists can talk about inflation rates falling or technical recessions but what voters are about is the economic factors that they feel.
The challenge for politicians today is that, for the best part of the last three decades, the UK has seen consistently low inflation, at around 2%. For voters to have experienced anything similar to recent inflation they would have to have been adults in the 1970s and 80s. Therefore, a majority of voters do not have personal experience with high inflation.
That means the sharp price rises seen since 2020 are felt keenly by voters, and will continue to be for some time, and unfortunately for many in power, for longer than they will be able to hold onto that power. Politicians would be wise to remember that and not expect voters to congratulate them, or re-elect them, solely on an announcement of 2% inflation.
By Stephen Hunsaker, researcher, UK in a Changing Europe.
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