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The UK Cost of Living Crisis: Are we Talking Enough About It?

The UK cost of living crisis.

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Are you aware of the impact the cost of living crisis will have on you? Inflation rates are rising faster than the average amount of disposable income, and goods and services are becoming more and more expensive. With the Conservative party in limbo, waiting for a new leader to be elected, the economy is in a crisis.

What do we Mean by the ’Cost of Living’ Crisis?

The term ’cost of living’ refers to the amount of disposable income, that is, the amount of money a household has after taxes have been deducted, that an average UK household has. Due to inflation rising, the cost of everyday essentials such as food, shelter, and Energy has increased.

In July 2022, the annual inflation rate reaches the highest it has ever been since 1982 with predictions from Cornwall Insight that this will only keep rising. Following Russia’s invasion of Ukraine, the Bank of England forecasts inflation to peak ”at slightly over 10%,” yet with rates of CPI already reaching 9.4% in June 2022, it is looking likely that inflation will be exceeding this figure. The Consumer Price Index (CPI) is one of the main ways to measure inflation, tracking the overall change in consumer prices across the goods and services market.

In simple terms, therefore, the basic cost of necessities is rising much faster than the average ‘real’ income. Since the end of 2021, it has been at A crisis point.

Real Examples of the Cost Of Living Increasing

The UK general public is noticing a rise in consumer goods and services, demonstrating the current economic crisis. Indicating this most effectively is the sharp rise in energy and Road fuel prices.

Exploring the global gas demand since COVID-19, researchers at the House of Commons Library state that ”from July 2021 to July 2022, domestic gas prices increased by 96% and domestic electricity prices by 54%”. This means that households are facing electricity bills of nearly double the price all in the space of a year.

At the end of May 2020, road fuel prices are at the lowest level for five years. On the 21st March 2022 petrol reaches a record price of 165.4 pence per liter. Records have been broken at both ends of the spectrum, in less than two years. As of the 4th of July, petrol averages 191.6 ppl and diesel 199.2 ppl, again exceeding records. How are households keeping up with this level of inflation?

What has the Government Done? Are there Plans in Place?

Announcing measures to support households in February, March, and May 2022, the UK government launched their ‘cost of living package’. Including a £400 grant for energy bills and £650 for over 8 million UK households on means-tested benefits, measures are in place to try and ease the crisis.

Boris Johnson has recently confirmed that he doesn’t plan to introduce any new measures to combat inflation before his successor is elected on September 5th 2022.

Dominating the Tory Leadership Contest, Liz Truss and Rishi Sunak both address their plans to tackle the cost of living crisis. Truss wants to implement an emergency budget as soon as possible. Aiming to target the rising number of National Insurance Contributors, she hopes this is one measure that will aid disposable income. Criticizes say that these measures won’t help those on the breadline and will benefit the Middle Class. Pensioners, the elderly, and those earning under £12,500 don’t pay taxes in the UK. The worry is that those struggling to survive won’t see the impact of cutting taxes. Rishi Sunak has said he would get rid of VAT on energy bills. The rest of his plan seems dependent on the next few months.

Cornwall Insight’s Forecast

Ofgem, the GB energy regulator, is releasing an announcement this Friday (26th August) surrounding the October energy price cap. Ahead of this, Cornwall Insight has given a final forecast.

The main headline is that ”predictions show a typical household will be paying £3,553 equivalent per year for their energy bills”. Are the UK public aware of the impact this amount of money is having and going to have?

Giving a statement on the report Dr Craig Lowery, the Principal Consultant at Cornwall Insight has this to say:

”Our final predictions for October are truly concerning… it is difficult to see how many will cope with the coming winter. The energy crisis is not something which can be solved with hastily put together short-term policies.”

Fears are growing as we look ahead to the winter. A winter where many will face economic hardship, yet at this moment in time, it is unclear quite what that means for everyday life.

How Much are we Speaking about this? Too Much?

Frightening predictions for the UK’s economy, but to what extent are the general public aware of the issue? Yes, it’s dominating the media, and Tory leadership contest however, are we aware of the real hardship this could bring to everyday life? On the other hand, has the cost of living become a throwaway phrase? Are people getting fed up with hearing it? Without little change in government policy, is it an issue that has reached its end? With many already struggling, is it just scaremongering? Or, as suggested, is it something that needs to be spoken about more?

The UK cost of living is still very much at a crisis point and, for now, this is forecasted to only get worse.

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