Record 7.4m UK households unable to afford basics as food inflation outpaces CPI

A record 7.4 million low-income UK households were unable to afford essential items like food and heating in the past six months, up from 7.1 million a year ago. According to the Joseph Rowntree Foundation, 62% of the poorest 40% of families are experiencing material hardship, with almost half skipping meals or cutting portion sizes to manage budgets.

The primary driver is a divergence in inflation. Food prices rose by an average of 4.1% between May 2025 and May 2026, outstripping the overall inflation rate of 3.6%. Because lower-income demographics spend a disproportionately high share of their earnings on groceries, this gap severely restricts their purchasing power for non-essential goods.

The government is attempting to alleviate some of this pressure. Prime Minister Andy Burnham will cut VAT on electricity bills from October, a move expected to save households roughly £45 annually. This builds on previous interventions that reduced average energy bills by about £150 a year through adjustments to green levies and the Warm Home Discount, cutting the number of households unable to afford heating by 500,000 over two years.

However, the £45 VAT relief is widely seen as insufficient to restore consumer balance sheets. "The fear of juggling budgets that simply don't balance remains," said Juliette Flachm, Acting Head of Policy and Public Affairs at Christians Against Poverty, noting that 35% of UK adults now worry about their finances daily.

Chris Belfield, chief economist at the Joseph Rowntree Foundation, argued for deeper structural intervention. "Government policy can work. We need greater intervention to control rental prices, make energy affordable and improve the adequacy of Universal Credit so everyone can afford the essentials," he said.

A government spokesperson pushed back against the narrative of unmitigated crisis, pointing to macroeconomic improvements. "Household incomes have risen 5% in real terms, food bank usage has fallen, and food insecurity is down," the spokesperson said. The administration credited measures including the removal of the two-child limit on benefits, sustained above-inflation increases to Universal Credit, minimum wage hikes, and a new £1bn Crisis and Resilience Fund.

For markets, the data underscores a bifurcated consumer economy. While top-line inflation is cooling, the persistence of elevated food inflation continues to erode discretionary spending capacity at the lower end. This limits the growth potential for mass-market retail and consumer services sectors that rely on lower-income footfall. Furthermore, ongoing government interventions to suppress energy bills continue to constrain the pricing power of domestic utility suppliers.