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Responses to the Inflation Crisis in Europe: Securing the Food Budget to Safeguard Citizens’ Purchasing Power

Speakers

Maria del Mar Cantero Guerrero

Researcher in the Working Life Unit 

Eurofound

Martin Caraher

Emeritus Professor of Food and Health Policy at the Centre for Food Policy

City University of London

Moderator

Nicolas Vincent

The war in Ukraine and subsequent economic and energy crisis are affecting all levels of society, particularly low-income households. Inflation is rising and prices are breaking historical records, with food prices being particularly affected. Low-income workers and pensioners, young adults and multi-child families are struggling to afford food. Policy responses are needed to secure the food budget and avoid negative consequences for public health and the economy. Food security should be a priority for governments to maintain social cohesion.

The P&P session studied public policy response to these challenges, in particular:

•How does high inflation affect households’ budget, in particular low-income workers and vulnerable communities?

•The importance of food security in a crisis context.

•The role of public administrations in ensuring a healthy and sustainable alimentation to low-income workers in an inflation context.

Food crisis since Covid

Ms Cantero, researcher at the Working Life unit at Eurofound, started with an overview of existing policies across Europe: “every single country has introduced several types of measures at once, so we have seen measures that have provided just open support to citizens”: countries have simultaneously implemented measures for the entire population on the one hand, and targeted measures for specific groups of citizens.  Some of these, “do take a longer-term” to be effective, she admitted, like subsidies to better insulate homes or promoting greener energy. “The scale of the crisis,” she continued, “really called for the application of more targeted measures.” The reason, to Ms Cantero: “a lot of vulnerable groups have really felt the consequences more strongly.” Presently, “measures that have been more targeted also take advantage of the existing systems.” She added that the measures to tackle the effects of inflation have focused more on increasing incomes (whether for the population at large or for specific groups) or to cover energy payments, whereas only few measures have directly targeted food. In France, for instance, where food vouchers are well established, “they extended their use to different types of food.” Previously, “vouchers were only eligible for food that was already ready for consumption,” explained Ms. Cantero. “So, you could buy a sandwich or some fruit, but you couldn’t have bought for instance raw pasta.” Now vouchers ensure a secured food budget for all its beneficiaries.

Martin Caraher, Emeritus Professor at City University of London, provided an insight on food insecurity: as he pointed out, the issue rose “by a factor of five across Europe.” Also, “obesity is growing among low-income groups so we’re seeing both hunger and obesity in the same groups,” he explained. “It’s very disturbing within such a short period of time,” he added, as we’re seeing this trend only since Covid hit Europe so just in the space of 18 to 24 months of lockdown and the subsequent crisis.

During that time of hard lockdowns, “online ordering of food increased, but receded once restrictions were removed.” What we’re seeing now rather is “micro-online ordering,” in the form of “having snack food delivered at your door” by an online platform. Young and low-income consumers resort to it “and this is probably contributing to increases in obesity because it’s largely high fat, salt and sugar foods,” Martin Caraher emphasised.

“43 million people in Europe (excluding the UK), were unable to afford a quality meal every second day,” Mr Caraher stressed. Even Sweden, with a strong welfare system, had to introduce social supermarkets to tackle this recent problem of hunger. “So, we’re seeing this even in the well-developed economies,” he explained.

Mr Caraher alerted: “4 in 10 consumers in Europe have experienced a drop in their household income because of the pandemic.” As food is an elastic item, he explained, “households cut down on food expenditures before other outgoings in their family budget” and this will cause a drop on food expenditures in the next couple of months. This behaviour mostly affects “consumers and countries that have been impacted by high inflation,” he continued. Mr Caraher gave some alarming results of a survey run in the UK, from the Food Standards Agency: “40% of participants reported feeling worried about not being able to afford food in the next month.” Also, “30% reported that they had skipped the meal or cut down the size of their meals,” stressing that these were mainly women, “mostly mothers sacrificing for the rest of the family.” The study also shows “32% reported eating food passed its use by date,” not as a conscious decision, insisted Mr Caraher, but because they had no choice. “18% of participants had turned off a fridge or freezer to save on energy costs,” he continued. “Now this has implications not just for nutrition but for food safety as well,” he insisted.

Price increase in foodstuff higher than general inflation

“It’s not just people on welfare,” said Mr Caraher about people suffering from food inflation, “it’s now active people on the labour market but on low incomes,” he stressed. “Because of insecure incomes or because of what we call the gig economy,” he expressed, “they are not on fixed term contracts, so they are now suffering as well.” For the panellist, “the biggest rise we’re seeing in food insecurity across Europe is in the working poor.” Still quoting the study, he stressed that, in spite of awareness campaigns about healthy eating, “58% of surveyed people buy less fruit and 48% fewer vegetables.” These products spoil quickly, so the consumers are keener to purchase processed foods “which keep until the end of the month.” 

Current general inflation in the UK, reminded Mr Caraher, is 12%. “That’s 2 points higher than EU inflation,” he insisted. “Our food inflation,” he continued, “is running at 16%.” Mr Caraher warned: “we have to be careful about just looking at average food prices because within that there are hidden increases.” Pasta, for instance, went up nearly 60% while “we know people on low incomes use,” as the ingredient can be stored.

Credit and debit cards were massively used during the pandemic, but afterwards, Mr Caraher noticed “a return to cash as a means to manage food.” An easier way to tame spendings: “they go in with 10 euros, spend those 10 euros,” and nothing more, he explained. In times of greater inflation, especially on basic products, we see a case of poverty premium, he described: “people on low incomes pay more for their food and for their energy, generally about 20%.” They are faced with important decisions: choosing between eating or heating. “it makes sense to order in food if you can’t afford to turn on your oven,” he illustrated. “You may pay slightly more for ordering in fast food, but you then don’t have to heat your oven and spend money on energy.”

As a shortcoming, Mr Caraher stressed “cooking less means people are cooking less fresh vegetables and less fresh meals, and there are probably health implications regarding this phenomenon.”

Hospitality sector could play a role

After this alarming diagnosis, Mr Caraher explained: “a lot of the solutions I’m seeing are not coming from Europe,” he argued, “they’re coming from South America where we’re seeing civil society and public private partnerships (PPPs) emerge to tackle this crisis.” In his view, hospitality services are going to have to adapt “to a new world with consumer trends and demands.” A close look at the data for hospitality across Europe shows “an increase in businesses, new hospitality businesses,” but figures show that 20% to 35% “will fail over the next winter because of increased costs.” 

PPPs between hospitality and the government are created so “subsidising cafes, restaurants and other eating areas – it is not just for them to be eating places but also to be social places.” 

Mr Caraher noticed “one of the big failures during the initial lockdown was not using the hospitality sector.” He continued: “I’m seeing a lot of this with partnership more with civil society rather than with governments in places like South America.” There, “civil society is making the relationships with business, not government. This can be good for the environment because you’re lowering heating and production costs because you’re centralising production and it can be very efficient.” In the UK, he added, “we’ve seen a lot of domestic price caps but less help for hospitality.”

Now, “we’re seeing hot spaces,” explained Mr Caraher. They’re like food banks but for heating, “where people can go during the day,” for a small cost.

Healthy eating as a productivity factor

Mr Caraher continued: “companies that have a commitment to employee health have better productivity and health outcomes,” he explained. “This is the selling point to the private sector,” in his view: “by looking after your employees either through something like the ticket system or food vouchers you are contributing to your own welfare, your own company welfare and increase productivity.” He concluded: “food at work, school and university can be helpful” and, therefore “providing food during the working day at school or at university are key issues in the coming year.” Because, if there is a 20% to 30% productivity increase through better eating at work, what applies for employees should work for “schools, universities and hospitals,” insisted the panellist. 

Quoting UN special rapporteur on extreme poverty Olivier De Schutter, Mr Caraher said “we have to move away from one-off payments to continuous payments and build us into welfare and into wages so that people can cope.” 

Also, “if you feed people at work,” he explained, “you free up money for other people to be fed in that family,” so, “we need workplace adoption to ensure staff eat,” worked out Mr Caraher. This could take place either as a ticket system, a voucher system or “people providing meals in restaurants.” The idea is to ensure minimum nutrition and “not just about providing food.” 

Surprisingly, “the USA is the only country in the world that’s reduced its food insecurity among children,” Mr Caraher added. 

Ms Cantero added “we have seen many of the measures in combination,” as income support has been used not only to tackle energy inflation, but both energy and food insecurity.

Countermeasures put in place by governments

With food inflation costs running ahead of general inflation costs, warned Mr Caraher, indexation of wages will not be able to catch up on the rise in price of foodstuff. “I’m in favour of the universalist approach,” he added. There are many reasons to that but one of them is “it removes stigma.” Although Mr Caraher agreed “we need targeting measures,” considering the scale of the crisis.

In Mr Caraher’s view, “governments need to step in.” The panellist supports public intervention: “there is no control on the global food supply system,” he defended, “so a number of companies profit from the decrease in wheat supplies.” Mr Caraher lamented, “because there is hardly any control of the global food supply system,” he explained, “they have created a handful of billionaires while a hundred million people are confronted to food insecurity.” 

Mr Caraher agreed measures that governments put in place are not sustainable in the long term. “We’ve got to look to Green energy,” he argues. “With Covid, the war in Ukraine and the global crisis” that ensued, “we saw the food system is broken.” He continued, “it’s not fit for purpose, so we do need short-term measures to support it.” The problem, he explained, is “those short-term measures are based on a non-sustainable system which is oil and energy dependent.”

Ms Cantero mentioned Romania’s food voucher policy to help people in distress. In Romania, food voucher programmes for vulnerable citizens already existed so people in most dire needs were already identified. The first social voucher’s programme “is estimated to benefit three million people as a whole amongst which 2.3 million will be pensioners”. She put it as a best practice since “it really shows a very rare example of a more targeted measure”. Indeed, the voucher system “targets not only a specific item such as food but also specific target such as more vulnerable citizens”.

We are yet to see, she stressed, “a case that was completely created from scratch and applied to solve the crisis.” It was “either these general measures or the more targeted ones that have taken advantage of this existing infrastructure,” either by expanding it or by changing their application slightly. Ms Cantero continued: “when it comes to inflation, there’s no measure that appeared from scratch.” Some of these measures might have popped up during Covid crisis but “we haven’t seen a completely novel mechanism that was created from scratch” to address the current inflation crisis.

In the near future, Mr Caraher does not see a bearish trend in food prices. “The argument is we’ve had cheap food for too long.” It is more a matter of making food affordable, especially for people on low incomes. In his view, “we need to move our subsidies from certain foods such as meat production to horticultural production.” Another issue that arose since Covid lockdowns: children went through prolonged periods of inactivity. This, combined with worsening eating habits, contributed to obesity, “especially in households with low incomes,” added Mr Caraher.

Ms Cantero highlighted the necessity of targeted public spending in opposition to general measures. Indeed, “the scale of the crisis really necessitated the application of more targeted measures because there is a lot of vulnerable groups that have deeply felt the consequences more strongly”. However, it seems “easier to do more of a general support as well, instead of waiting to identify and properly design the mechanisms for people that are most in need”.

To Ms Cantero, there is public pressure on the governments because there is a sense that general measures help the most vulnerable but that also other citizens are left behind “when their needs are not targeted.” Targeted measures are starting to show up but “they have been mostly based on existing institutions,” she added. “The choice would be now whether completely new institutions need to be created to solve the issue, or whether the ones that already exist need to be extended or modified in order to adapt to the current crisis.” Ms Cantero believes we are going to see a large number of new instruments introduced in the next few years to ensure access to food for all.

Mr. Caraher concluded the session by bringing emphasis to the need to link income levels to adequate diets in regard to food insecurity. He suggested implementing continuous support, such as increasing benefits when food prices rise, rather than single payments as a solution.