CPI inflation reaches 40-year high

The Consumer Price Index (CPI) measure of inflation rose to 9% in April 2022, the Scottish Parliament's Social Justice and Social Security Committee said in its 8th Report, 2022 (Session 6), published on 2 July 2022¹. The committee described this as a 40-year high, driven by sharp rises in energy bills and the highest food price inflation in a decade¹.

The report also cited Institute for Fiscal Studies work showing that the "bottom ten percent" of earners face inflation above 10 per cent¹. It said over 600,000 people were over indebted in Scotland, 150,000 people sought debt advice, and more than 60,000 people in Scotland had either got into debt for the first time or seen existing debts get worse¹. The committee also reported that one in five disabled people and one in four families with disabled children face extra costs of more than £1,000 a month, and that disabled people make up 48 per cent of the total number of people in Scotland living in poverty while being only 22 per cent of the population¹.

On the cost of living response, the committee welcomed the doubling of the Scottish child payment from £10 to £20 a week, the rise to £25 a week by the end of the year and the benefit's extension to under-16s¹. It also noted a commitment to recruit at least 250 community link workers by the end of 2021-22, and an aim of reaching 300,000 households by 2026 through a scheme that can provide free internet access for up to two years for those most in need¹. The committee said it believed it was unreasonable to expect households to live on £566, and noted that the Minimum Protected Balance had been increased to £1,000¹.

On credit, the report said that under plans set out by the UK government on 20 June 2022, Buy-Now, Pay-Later lenders will be required to carry out affordability checks to ensure loans are affordable for consumers, with an aim of having secondary legislation in place by mid-2023¹.

The report also raised concerns about public sector debt collection, noting that some local authorities only offer online communications and that there can be a 7-week response time for emails¹. It said a full independent review of the Scottish Welfare Fund was due to be published in September 2022¹.

Why it matters for households

The 9% CPI figure for April 2022 is the headline measure of how much more expensive a typical basket of goods and services had become over the previous year¹. For households, that rate describes the pace at which prices were rising, not the level of prices, which remain higher than a year earlier. The committee's evidence indicates the pressure was not evenly spread: the bottom ten percent of earners faced inflation above 10 per cent, according to the Institute for Fiscal Studies¹, and disabled people and families with disabled children were reported to face extra costs of more than £1,000 a month¹.

The report links the inflation reading to debt: it said more than 60,000 people in Scotland had either got into debt for the first time or seen existing debts get worse, and that people were using high interest credit and Buy-Now, Pay-Later services to delay or split the cost of essential items like food¹. The committee said it remained concerned that these types of lending will see greater uptake with current inflation rates resulting in future debt¹.

For households in Scotland, the report sets out where support was being increased, including the Scottish child payment rising from £10 to £20 a week and then to £25 a week by the end of the year, and its extension to under-16s¹. It also notes the Minimum Protected Balance was increased to £1,000¹.

What happens next

The report says the UK government's plans for Buy-Now, Pay-Later regulation, announced on 20 June 2022, aim to have secondary legislation in place by mid-2023¹. It says a full independent review of the Scottish Welfare Fund was due to be published in September 2022¹. The committee said it intends to seek an update from Social Security Scotland in two years to consider any debt related to overpayments¹.