The cost of living crisis: eat or heat?
Families will be hit even harder by the cost of living crisis from today (Friday 1st April), as council tax, energy, and water bills are set to increase in price across the UK.
In February of this year, inflation rose to 6.2% - the highest level in 30 years - amid record high prices of petrol and a steep rise in the cost of food, gas, and electricity.
A combination of Brexit, post-lockdown consumer demand, and a rise in the cost of labour are said to be the driving factors of the recent higher living costs. And Russia’s invasion of Ukraine has only added fuel to the fire.
On the impact of the Russia-Ukraine war, the Bank of England’s deputy governor, Ben Broadbent, said: “From an economic perspective, coming on top of what was already a very steep rise in the cost of globally traded goods, in the wake of the pandemic, the invasion has led to substantial rises in the cost of energy and other commodities.
“As a big net importer of manufacturers and commodities, it’s doubtful that the UK has ever experienced an external hit to real national income on this scale.”
According to the Office for National Statistics (ONS), 83% of adults in a survey of 13,000 noticed a rise in their cost of living this month. Soaring prices of utility bills and food have already caused 24% of these households to restrict their use of gas and electricity and 31% cut down their spend in weekly food shops.
Energy, water, and food are not luxuries, but essentials. So how much more are people expected to sacrifice?
We are yet to witness the worst of the cost of living squeeze. From today, our financial situations will be exacerbated by further rises in costs: gas and electricity bills are expected to rise by 54%, and band D council tax bills are estimated to increase to £67. As well as this, the cost of public transport, clothing, furnishings, and prescriptions are also set to rise imminently. Inflation of non-food items will be at the highest rate since February 2011.
Retail Economics have said that, after purchasing essentials, the average family’s disposable income will fall by nearly 6.5%. And the poorest families will see their spare cash drop by a fifth this year, losing £850 that would usually be saved for non-essentials.
Impact on low-income families
31 organisations and anti-poverty charities, including turn2us, Child Poverty Action Group (CPAG), the Joseph Rowntree Foundation, and the Trussell Trust, have raised concerns over the number of families that will be plunged into poverty and are lobbying the government to increase benefits by 6%.
For a lot of people, this is not just a matter of keeping nice-to-have purchases at a minimum, limiting recreational activities, and shopping more at Lidl. The poorest households will be forced to compromise their own health or fall victim to poverty, as choosing whether to put food on the table or live in a cold house is a decision they will have to make every day.
The World Health Organisation (WHO) recommend the minimum indoor temperature thresholds of 21°C for living rooms and 18°C for bedrooms. According to the Centre for Sustainable Energy (CSE), if your home temperature is between 14-15°, you may be diminishing your resistance to respiratory diseases, and if it falls below 13°, your blood pressure will increase and you may be at risk of cardiovascular disease. But when money is tight and energy bills are due to skyrocket, maintaining safe room temperatures will simply not be attainable for some families.
In February, credit card borrowing had already increased by £1.5 billion - a record high. And more poor families are predicted to resort to expensive means of lending just to make ends meet. Credit repayments will only burden their financial situation in the long-term, but many have no other choice in the short-term.
Policies set to ease the cost of living crisis
Last week, Chancellor Rishi Sunak announced a 5p cut in fuel duty. However, following the announcement, the RAC claimed that it was unlikely to make much of a difference to consumers, as prices had already risen so steeply and quickly. And now the cut has been implemented, the motoring group have since said that it is yet to be fully passed on to drivers.
On the 5p fuel cut, Rod Dennis from RAC said: "Unfortunately, wholesale fuel prices were already rising before the chancellor made his announcement on fuel duty last week.
"This meant retailers were buying fuel in at a higher cost than they were a week earlier, which meant drivers may not have immediately and fully benefited from the duty cut.
"Wholesale prices are currently falling, but it's likely to be next week before we see what impact this has at the pumps."
The government has offered a one-off £150 council tax rebate in response to the crisis. Most households in Bands A-D will be eligible for the rebate, which is expected to knock £53 off the total annual council tax payment. Without this, most people would see a 4.5% increase in their council tax rate.
It has also proposed to provide a £200 discount on energy bills for domestic electricity customers, which will be available this coming autumn. But the loan will have to be paid back within the next 5 years.
For more information on government support for energy bills, visit the government website.
More needs to be done to help low-income families who have been, and will continue to be, forced into poverty as a result of the government’s neglect and profit-grabbing utility companies. We were promised a Brexit Bonus, but an ever rising cost of living is all most people will receive.
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