100 million meals in Eat Out to Help Out scheme pushes down UK inflation

People ate more than 100 million meals in August as part of the Eat Out to Help Out discount scheme, which helped push UK inflation to its lowest level for nearly five years

LAST month's Eat Out to Help Out scheme and the Government's VAT cut helped push UK inflation to its lowest level for nearly five years in August, according to official figures.

The Office for National Statistics (ONS) said the Consumer Prices Index tumbled from 1 per cent in July to 0.2 per cent in August - the lowest rate since December 2015.

Chancellor Rishi Sunak's popular Eat Out to Help Out discount last month was the biggest driver in pushing down the rise in the cost of living by slashing prices in restaurants and cafes.

The ONS also said the cut to value added tax (VAT) on hospitality and tourism from 20 per cent to 5 per cent helped lower inflation.

It added that air fares fell in August for the first time on record as the pandemic saw more people holiday in the UK this summer.

Clothes prices also fell back as retailers held off from raising prices for the usual autumn selling season, with a 0.4 per cent rise between July and August against a 2 per cent rise a year earlier.

Jonathan Athow, deputy national statistician at the 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.

"For the first time since records began, air fares fell in August as fewer people travelled abroad on holiday," he added.

The most recent figures from the Treasury estimated that Britons ate more than 100 million meals last month as part of the Eat Out to Help Out discount scheme.

Diners received a state-backed 50 per cent discount on meals and soft drinks up to £10 each between Mondays and Wednesdays in August in a bid to boost the hospitality sector after lockdown.

The ONS said CPI inflation in the restaurants and hotels sector fell by 2.6 per cent last month, marking the first time it has been negative since records began in 1989.

While it had a one-month only impact on inflation, Samuel Tombs, at Pantheon Macroeconomics, said CPI was set to remain "comfortably below 1 per cent in the remaining months of this year".

He added: "Firms in the services sector likely will have to absorb higher Covid-19 related costs, rather than pass them on to consumers, in the face of lingering weakness in demand."

The August inflation drop comes ahead of the Bank of England's interest rates decision on Thursday, which is set to keep rates on hold at 0.1 per cent.

But experts are pencilling in further action in the shape of more quantitative easing in November or December to help the economic recovery as government support measures come to an end.

The ONS figures revealed air fares dropped by 20.6 per cent year-on-year last month as the pandemic hit demand for overseas travel, with more countries added to the UK's quarantine list.

Last year, air fares rose 22.4 per cent between July and August.

The data also revealed another steep fall in fuel prices, with average petrol prices standing at 113.1 pence per litre in August against 128.3p a year earlier.

Meanwhile, the CPI including owner-occupiers' housing costs (CPIH) - the ONS's preferred measure of inflation - was 0.5 per cent last month, down from 1.1 per cent in July.

The Retail Prices Index (RPI), a separate measure of inflation, was 0.5 per cent last month, down from 1.6 per cent in July.

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