The cost of food

I wrote recently about the huge fuel price rises and the impact that is having on low income families in fuel poverty. But there are of course other demands on household budgets, the biggest being food. Like fuel, the price of groceries has been rising rapidly: food inflation rose by 6% last year, while overall inflation was just 2.1%. And the cost of food is, in all likelihood, going to keep rising, sharply.

There are four reasons for this. The cost of fuel is the first - because not only do crops have to be transported; they have to be planted, tended, fertilised and harvested. It is four times more expensive to farm now because of fuel rises.

Fuel is also the second reason: the huge growth of the bio-fuels market. Corn-based fuels like Ethanol are diverting a huge acreage of farmland away from producing food and towards producing fuel. This is why cereals are becoming so expensive - there is simply not enough arable production being used for food any more. This is a classic example of supposedly virtuous green alternatives creating far greater problems than they solve.

The third reason is the poor harvests we've had this year - the Summer floods in this country; the drought in Australia, the impact of El Nino on the caribbean and America to name a few. This was an unusually bad year, and things should get better in 2008.

The fourth is the growth of the Asian economies. As people grow richer, they eat more, and in particular they eat more meat. 1 kilo of beef requires 8 kilos of grain which requires up to 8 tonnes of water.

Fuel costs may fall and harvests will recover but the damaging drive for biofuels and the growth of China and India are not likely to disappear. It's why food prices are forecast to rise by up to 50% in the next ten years.

Some sanctimonious middle-class environmentalists who have never had to worry about choosing between keeping the family warm and feeding them say this is a good thing: that we have been spoilt and should pay the true cost of our food. While lots of food is wasted by British shoppers; it tends not to be those who have to budget tightly who end up throwing food out - but those for whom food costs aren't an issue.

Why am I blogging about this? Because government, sooner or later will have to intervene. The government measures inflation by including things like electrical goods that are, in fact, becoming signfiicantly cheaper. Because of this, the inflation measure - which in turn is the basis for pay settlements - is falling significantly behind the everyday costs ordinary people are experiencing. And that isn't sustainable. The government needs to start measuring real inflation accurately - not just so pay keeps pace, but also because a 6% inflation rate would demand action.

Many of us are either wealthy enough to not notice, or not care too much about this inflation. But the least affluent - especially those on fixed incomes - are being horribly squeezed and it's going unnoticed. They'll will be forced to buy even poorer quality, less nutritious food - or worse, be forced to go without.

This is a serious problem that only a Labour government can be expected to address.