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Eating Out Scheme Causes Decrease in Inflation

As the eat out to help out scheme pushed down restaurant prices, it caused the UK’s inflation rate to fall sharply. Currently, the inflation rate is sitting at a five-year low.

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Eating Out Scheme Causes Decrease in Inflation
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As the eat out to help out scheme pushed down restaurant prices, it caused the UK’s inflation rate to fall sharply. Currently, the inflation rate is sitting at a five-year low.

Inflation is the rate prices for goods and services grow, affecting everything the cost of shopping to the price of train tickets. In short, it affects how far your money goes. Higher inflation means higher prices, and if your wages aren't growing in line with inflation, in "real terms" you'll be worse off.

It is usually assessed as a "basket" of regularly purchased goods. It compares how much they cost now to last month and at the same time the previous year.

The eating out scheme offered consumers 50% off food up to a value of £10. The offer ran from Monday to Wednesday. On top of this, the VAT cut also contributed to the drop in inflation. Jonathan Athow, a statistician at the Office for National Statistics (ONS), said, "The cost of dining out fell significantly in August thanks to the Eat Out to Help Out scheme and VAT cut, leading to one of the largest falls in the annual inflation rate in recent years."

Athow also commented that there was a significant decrease in airfares in August as fewer people were travelling abroad for their summer holidays. He told the BBC that the expected increase in clothing prices around this time of year, as the autumn ranges hit the shops, have also "failed to materialise”.

The UK’s inflation rate is the lowest it has been since 2015.

Low inflation is a positive thing for consumers and borrowers.  It means you can more easily make your money go further. However, for savers, it can have a negative effect as it affects the interest rates set by banks and other financial institutions.

Before these figures were published, there had been growing concerns among economists that the UK’s inflation rate would turn negative, resulting in deflation. Falling prices of goods can lead to lower consumer spending. Many shoppers will delay large purchases as they believe big-ticket items will become cheaper still. This, in turn, also contributes to deflation.

Capital Economics' Thomas Pugh told the BBC that August's figure was probably "the low point" for inflation. Pugh also said inflation was unlikely to hit the Bank of England's 2% target within the next few years.

The Eat Out to Help Out Scheme was the main contributor to the decrease in the inflation rate. According to the ONS, consumers claimed discounts for more than 100 million meals through the Eat Out to Help Out scheme. The ONS also reported that prices in restaurants and cafes were 2.6% higher in August last year. This year is the first time they had been negative since records began in 1989.

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