No - what I said was a fact. Food commodity prices have declined sharply since the War driven hikes of 2022 and are still declining. UK food prices are being driven by a UK issue right now. The Labour budget.
I was listening to a supermarket CEO about a week ago explaining that the food industry employs a large number of people and people have been deliberately made more expensive to employ by NI tax changes hammering employers and by minimum wage rises. It is inescapable that these costs are passed on to consumers. This is Labour generated inflation.
This does not impact me at all, but I notice a continual rise in the cost of food at the supermarket. Most supermarkets have tiny margins. It isn't them boosting costs. They just pass on the costs imposed on them by government and by government impositions on the supply chain.
Let's assume for a moment that producers only try to recoup the extra tax, national insurance went from 13.8% to 15% or 1.2% on their Labour cost. If you take for example Clarkson's farm, how much would that add to the farm's running cost? Thousands. I would have thought may be 0.1%. Totally insignificant compared to other running cost like energy, maintenance, insurance, equipment renewal etc which run in millions.
Here is chatGPT calculation:
It’s difficult to put a precise number on how much extra employer National Insurance contributions (NICs) have directly contributed to food price inflation in 2024, because many factors drive food inflation (commodity costs, energy, supply chains, labour, regulation). But we can sketch a reasoned estimate and constraints.
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What we know
In the UK, as of April 2024 (under the 2024 Autumn Budget), employer NICs were increased by 1.2 percentage points, from ~13.8 % to 15 %. Simultaneously, the earnings threshold for employer contributions was lowered, extending the base over which employers pay.
Many businesses, especially labour-intensive ones (like food production, retail, hospitality), indicated they would respond by raising prices, reducing margins, or adjusting employment.
The economics observatory notes that the NICs increase (and minimum wage increases) are “blamed for” upward pressure on food prices.
In the Bank of England’s Decision Maker Panel survey, 54 % of firms said they would “increase prices” in response to the NIC increase.
So qualitatively, the extra employer NICs do impose upward cost pressure, and a portion of that likely gets passed to consumers via food price inflation.
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Estimating its quantitative contribution: rough bounds
To estimate a share of food inflation due to NIC increases, one needs:
1. The increase in average unit labour cost in the food supply chain attributable to the NIC change.
2. The share of labour costs in total food production/retail costs.
3. The extent to which those cost increases are passed through to consumers (pass-through rate).
We do not have precise numbers for all these in 2024, but we can frame plausible bounds.
Suppose labour costs in the food/retail chain account for, say, 20 %–40 % of total cost (this is plausible in labour-intensive processing, packaging, transport, retail).
The NIC increase is 1.2 percentage points over ~13.8 %, i.e. about an 8.7 % proportional increase in NIC tax burden on wages (1.2 / 13.8 ≈ 0.087). But not all wages are taxed at the full rate, and only a share of wages fall into the zone affected by the threshold change, so the effective increase in labour cost might be lower, say 3 % to 6 % of wage bill.
Then, the impact on total cost = (share of wage cost) × (proportional increase in labour cost). So e.g. if wages are 30 % of costs and NIC adds 4 % extra labour cost, that’s 0.30 × 0.04 = 0.012 = 1.2 % increase in cost baseline.
If pass-through is, say, 50 % to 100 %, then the impact on consumer prices might be 0.6 % to 1.2 % added inflation.
Thus one might estimate that the extra employer NIC contributed on the order of 0.5 % to 1.0 % of additional food price inflation in 2024 (i.e. it added that much to the year-on-year food inflation rate), as a rough guess.
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Caveats & uncertainty
The share of labour in total cost differs greatly across food categories (fresh produce, processed foods, imported goods have lower labour share).
Some employers may absorb costs (reduce margins) rather than fully passing through to consumers.
The effect is likely lagged (not instantaneous), so 2024 might not fully reflect the cost push.
Other inflation drivers (commodity prices, energy, regulation, imports) are substantial and may swamp the effect of NIC increases.
Surveys that firms “intend” to raise prices don’t guarantee they actually do, or do so fully.
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Summary
While we can’t pin a precise figure, a plausible estimate is that the extra employer NIC burden in 2024 may have added somewhere between 0.5 % and 1.0 % to food price inflation (i.e. increasing the food inflation rate by that margin).
