The UK Cost of Living Crisis
Having a UK cost of living crisis is something that has been ongoing for years now. Prices for many essential goods have been increasing faster than household incomes, leading to a drop in real incomes. This is a very serious problem in the UK since 2021.
These some key takeaways are from Bloomberg:
- The outlook is dire: the country is already experiencing a recession, and households are facing the largest drop in disposable incomes since the beginning of the fiscal consolidation program £55 billion.
- The most vulnerable will be provided with some protection. Pensions and benefits will rise in line with inflation. However, the energy aid is extended with a higher price cap.
- Energy companies are under fire from a new windfall tax for low-carbon generators, and an extension of the raid on oil or gas companies.
What won’t change in the future? Thresholds to pay into the national insurance system and the inheritance tax – at most until 2028
In line with inflation, state pensions and benefits were increased by 10.1%. The minimum wage was also raised by 9.7% to £10.42. Rent increases for social housing were capped at 7%.
UK Cost of Living Crisis – What it is
During the last two years, there has been an increase in the cost of living in the UK. The rise has affected households in a variety of ways, from energy prices to groceries. It has become a major concern for the British public.
Rising prices for essential goods are putting more pressure on many families. It is estimated that about one-fifth of UK households spend over three-fifths of their income on fuel, food and electricity. These costs have risen at a faster rate than household income 🙁
The increase in the cost of living has also affected rent. In June, Citizens Advice found that one in five tenants expected rent to rise in 2022. This is despite the fact that the demand for rented homes remains strong.
UK Cost of Living Crisis – Problems
Currently, the UK – along with most parts of the world – is suffering from a cost of living crisis. It has caused significant pressure on public services, the third sector, and households. The impact is particularly felt by poorer households.
We are experiencing some of the highest rates of inflation in forty years, and food inflation is now at a 13-year high. It is projected that inflation will peak at just under 11% in October.
UK Cost of living crisis: pawning possessions to pay the bills: Video
Despite the rising costs, UK household incomes have not kept pace with inflation, and are set to be squeezed in the following year.
Our government has responded with a number of initiatives to try and address the cost of living crisis, such as direct payments to households and capping energy rates. It has also outlined and initiated a series of key interventions that will be introduced in 2022 and onwards.
