Rachel Reeves Budget backlash as food prices rise again

Families have been dealt a fresh financial blow as food prices jumped again with supermarkets pointing the finger at Rachel Reeves.

New inflation figures show food prices rose by 4.5% in the year to June, up from 4.4% the previous month - with staples such as bread, rice and pasta seeing month-on-month increases.

The surge flies in the face of retailer claims that prices are falling in the aisles as a result of supermarket competition. Critics said the figures prove there is little relief at the checkout for struggling households.

The rise in food costs came alongside a sharper-than-expected increase in overall inflation, which climbed from 3.4% to 3.6% - its highest level since January 2024.

The British Retail Consortium (BRC), which represents major high street names, blamed the Chancellor's Spring Budget and poor weather for driving up costs. They say the Budget increases in employer National Insurance and the minimum wage have added billions to their costs.

It urged Rachel Reeves to rethink plans for a business rates overhaul, warning it would only add to the inflationary pressure.

Kris Hamer, Director of Insight at the BRC, said: "While inflation has risen steadily over the last year, food inflation has seen a much more pronounced increase.

"Despite fierce competition between retailers, the ongoing impact of the last budget and poor harvests caused by the extreme weather have resulted in prices for consumers rising.

"The price of many staples rose on the previous month, including bread, rice and pasta though consumers in the market for chocolate benefitted from a decrease.

"With rising costs already driving up prices at the till, the Chancellor must take action now to protect consumers from inflation rising further.

"The proposed business rates reform would drive up costs for many high street stores, limiting investment and pushing up prices for everyone.

"If the Government wants to support households and high streets, they should ensure that no shop pays more as a result of these changes."

The figures were branded "a disappointment" for millions of families hoping to see prices come down after months of hardship.

Anna Leach, Chief Economist at the Institute of Directors, warned that the data raised the spectre of stagflation.

"With inflation still proving sticky and economic growth stagnating, the UK is skirting the edges of stagflation... The MPC will want clear signs that wage growth is moderating, and second-round inflationary effects are fading, before it can cut rates with confidence."

The latest figures have fuelled a growing backlash over the Government's economic plans, with some warning that shoppers are being misled over supposed "cuts" on the shelves.

Rachel Reeves, who has pledged to get a grip on inflation, is now under pressure to act swiftly to help rein in prices - and avoid sabotaging the Bank of England's path to cutting rates.

Matt Swannell, Chief Economic Advisor to the EY ITEM Club, said there is still hope the Bank could cut rates in August - but warned that progress is proving painfully slow.

He said: "Headline inflation is expected to edge up over the next few months and peak in September... There doesn't seem to be enough in these inflation numbers to derail an interest rate cut in August."

But with underlying "services" inflation - the Bank of England's preferred indicator - rising again, confidence in a rate cut has been shaken.