Chancellor Rishi Sunak will hope his tax-cutting pledges dominate the headlines from his ‘mini budget’ today. However, the reality is rocketing inflation is going to see the biggest drop in UK living standards since records began.

The inflationary news this morning would have made sobering reading for Sunak as he finalised his speech. Inflation reached 6.2% in February – a new 30-year high and a bigger jump than economists predicted – as energy and petrol prices raced higher.

This hike in prices is even before the full effects of the spikes in commodity prices unleashed by Russia’s invasion of Ukraine are fully incorporated into the figures. So inflation will only keep rising from here.

Indeed, Sunak told parliament today that OBR forecasts inflation to average 7.4% in 2022, peaking at a whopping 8.7% in the coming months.

There is no hope incomes can keep pace, so this 40-year inflationary high is expected to reduce real household disposable incomes by 2.2% per person in 2022-23 – representing the biggest fall in living standards in any single financial year since ONS records began in 1956.

The reality is that neither Sunak nor any other politician can magic this inflationary wave away. Sunak himself was quick to point out the UK’s level of inflation was still behind the US and roughly equal with the eurozone.

But with such an unprecedented squeeze on the cost of living, there is certainly a question mark over whether the measures he announced go far enough.

His most immediate help is a 5p per litre reduction in fuel duty from 6pm tonight – a reduction Asda has already committed to passing on in full to consumers (a 6p per litre saving including VAT).

That drop in fuel taxation – which is temporary for one year, but could last far longer – will reverberate through the supply chain. But a saving of £3-£4 to fill up a consumer’s car is meagre compared to the more than 50% jump in fuel prices in recent weeks, amid soaring wider energy costs.

Elsewhere, there were commitments on VAT for home energy improvements (such as insulation or solar panels) and another £500m for local authorities to help vulnerable households.

But the chancellor’s main remedy to the crisis appears to be in the personal tax code. Firstly, he hiked the income threshold for National Insurance by £3k, equalising it with income tax thresholds, to more than reverse the NI hike on the way and provide a net benefit to those in work earning less than £35k (although only pulling back around one-sixth of that overall tax rise in total).

The final rabbit from the hat was a commitment to lower the basic rate of income tax from 20p to 19p by 2024.

Given the likely timing of the next general election, that headline-grabbing move looks more of a political statement than an effort to alleviate the current wave of inflation.

In total, the support announced today and previously is better than nothing, but it does effectively mean consumers have been left on their own to manage the coming price crisis. Sky News surmised that today’s announcements (and others made since October) will offset around one-third of the overall fall in household incomes in the coming 12 months, with households having to absorb the other two-thirds themselves.

From a grocery perspective, perhaps what’s most notable about the current environment is that food price inflation remains relatively modest when compared to other essentials.

The cost of food and non-alcoholic drinks jumped to 5.1% in February, compared with 4.3% in the month before – with breads and cereals up 4.2% in the past year, meat prices up 5.2%, milk, eggs and cheese up 6.1% and fruit up 6.2%.

That’s higher than the BRC-KPMG Shop Price Index, which had food price inflation at 2.7% in February. BRC CEO Helen Dickinson noted supermarkets have stepped up to “expand their value ranges to support individuals and households on lower incomes”.

“Nonetheless, with retailers struggling to absorb these higher costs, shop prices look set to rise in the coming months,” she said. Former Sainsbury’s boss Justin King told the BBC yesterday that food inflation would last through the whole of next year and would rise to almost double its existing levels.

It’s clear UK consumers will face vastly higher prices and squeezed living standards this year, which will cause many to be pushed into poverty and hunger.

The chancellor may not have come up with all the answers – but it’s important the food and grocery industry doesn’t turn away from its responsibility to find ways to alleviate food poverty.

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