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Are you feeling the pinch of rising living costs? If so, you are not alone. The cost-of-living crisis is hitting households across the UK. Prices for essential goods and services are skyrocketing with wages struggling to keep up.
From rising energy bills to increasing food prices, many families are finding it harder and harder to make ends meet. But how long will this crisis last? And what can we do to weather the storm?
We explore the causes and consequences of the cost-of-living crisis and examine what the UK government is doing to help. So, buckle up and get ready to dive into one of the most pressing issues facing the country today.
The cost-of-living crisis has been hitting UK households hard over the past few months. The rising cost of essential goods and services is eating away at people’s disposable income. From rising food prices to increasing energy bills, the cost-of-living crisis is affecting people from all walks of life. Lots of people are now wondering how long it will last.
The cost-of-living crisis is when the cost of essential goods and services is increasing faster than wages. People are having to spend more of their income on necessities, leaving them with less disposable income.
What is inflation?
Inflation is the rate at which prices for goods and services increase. When inflation is high, the cost of living is rising faster than wages and salaries. As a result, people’s purchasing power decreases.
How is the cost-of-living crisis impacting UK households?
The cost-of-living crisis is having a significant impact on UK households, particularly those on lower incomes. According to research by the Joseph Rowntree Foundation, over 14 million people in the UK live in poverty. New rising living costs are now making it even harder to make ends meet. Many families are having to cut back on essentials like food and heating, while others are being forced into debt to cover basic living expenses.
The cost-of-living crisis has significantly impacted individuals’ disposable income, with many people seeing their spending power decrease over the past year. According to the Office for National Statistics, the average household disposable income in the UK fell by 1.7% in 2020, the biggest annual fall since the financial crisis in 2008. This is primarily due to rising prices for goods and services and stagnant wage growth.
How is inflation impacting the cost-of-living crisis?
Inflation is a crucial factor in the cost-of-living crisis, as it is one of the main drivers behind rising prices for essential goods and services. According to the Bank of England, inflation in the UK reached a nine-year high of 5.1% in November 2021, driven by rising energy and food prices. This means that people must spend more of their income on necessities, leaving them with less money for discretionary spending.
When will inflation go down?
There is no easy answer to when inflation will go down, as it is affected by a wide range of factors. Global economic trends, supply chain disruptions, and government policy are just some of the factors at play. Some economists predict that inflation could start to ease in 2023 as the global economy stabilises and supply chain disruptions are resolved. Still, others warn that inflation could remain high for several years to come.
How are UK energy prices impacting the cost-of-living crisis?
Energy prices are key drivers behind the cost-of-living crisis, with many seeing their energy bills double or even triple over the past year. This is mainly due to a global shortage of natural gas, which has pushed up prices for gas and electricity. This is particularly difficult for low-income families, who often spend a larger proportion of their income on energy bills.
What help is available for those struggling with the cost-of-living crisis in the UK?
The UK government has introduced several measures to help people cope with the cost-of-living crisis. These include; increases in the minimum wage, changes to the Universal Credit system, and the introduction of the Energy Price Cap to limit the amount that energy companies can charge. Various schemes and grants are also available to help low-income families with the cost of energy bills and other essentials.
These schemes include a £150 disability payment, which will be paid in a single payment and made automatically to eligible claimants. The payment will not be taxable or affect any other benefits the claimant is receiving. See here for eligible claimants:
- Disability living allowance
- Personal independence payment
- Attendance allowance
- Scottish disability benefits
- Armed Forces independence payment
- Constant attendance allowance
- War pension mobility supplement
The payment, scheduled to be made during the summer of 2023, will be exempt from tax, will not be subject to the benefit cap, and will not affect any current benefits entitlements.
£300 winter fuel payment boost for pensioners
Pensioners who are eligible for the winter fuel payment will receive an additional £300 on top of the usual payment. The winter fuel payment is tax-free to help older people keep warm during the winter months. The usual winter fuel payment amounts are:
- £200 for households with someone over 65
- £300 for households with someone over 80
With the additional £300 boost, eligible households with someone over 65 will receive £500, and eligible households with someone over 80 will receive £600. The payment will be made automatically to eligible claimants and will not affect any other benefits they receive.
It is important to note that eligibility for these payments is subject to specific criteria, and not all individuals will qualify. Individuals who believe they may be eligible for these payments should contact the relevant government department for further information.
How long will the cost-of-living crisis last?
The cost-of-living crisis is expected to continue into 2023 and 2024, but the government is taking steps to alleviate the household burden. While short-term measures are essential, long-term solutions are needed to stabilise the economy and create sustainable growth for the future.
Rishi Sunak has promised to halve inflation by the end of 2023. The Bank of England has anticipated a sharp decline in inflation starting in the middle of the year for three main reasons:
- The government’s scheme to cap energy bills for six months is expected to slow down the rapid increase in energy prices.
- The production issues plaguing businesses are beginning to improve, leading to a reduced rate of increase in the cost of imported goods.
- The UK’s demand for goods and services is expected to decrease, which should result in a slower rate of price increases for many items.
The cost-of-living crisis is a complex issue affecting millions of people in the UK. Rising prices for essential goods and services, combined with stagnant wage growth and high inflation, are putting pressure on households nationwide.
While the government has introduced measures to help low-income families, more must be done to address the underlying causes of the cost-of-living crisis and ensure that everyone has access to affordable, necessities.