Floods Update - 4

The Sunday Express has pointed out something obvious in retrospect: there needs to be £10 billion in flood damage repairs, and the Treasury is going to get a lot of VAT from that. Indeed, it will dwarf the £43 million in extra funding announced by Brown, in much the same way that the amount of international aid to developing countries was always overwhelmed by the demands of debt repayment.

The Observer provides a good overview of how the floods will lead to higher food prices.

Economists are harking back to the autumn of 2000, when some parts of Britain experienced the heaviest rains in 270 years, to project the likely effects on the rest of the country. Within six months, seasonal food prices had shot up 9 per cent. Higher living standards in China and India have increased global demand for meat and milk, and while consumer price inflation fell back to 2.4 per cent in June, food price inflation was double that. This has been exacerbated by severe drought in Australia and the US and a growing trend for farmers to grow crops for fuel instead of food. Consumers have enjoyed a period of relatively cheap food, with the share of household expenditure on food less than half what it was 40 years ago. Now, experts are suggesting the cost of some vegetables could rise by as much as 10 per cent.