UK Costs of living predicted to rise as shortages ensue

Britain’s poorer households are predicted to face a cost of living crisis this coming winter and next spring as higher inflation of energy bills paired with welfare cuts is predicted to set certain families back several hundred pounds.

The UK government has recently announced a £20 in Universal credit payments, a move which has been described as ‘diabolical’ by some as this impacts those who are most vulnerable in society.

This is because those on Universal Credit are on low fixed incomes, therefore, any cut in their income is a cut that they cannot get back as they have no way of increasing their income from Universal Credit payments.

The move to cut Universal Credit payments has been done by the government in an attempt to ease government spending as since the start of the pandemic, the government has been frequently overspending its budget, thus leading to national debt rising to £2.2 trillion. Consequently, because of the amount of debt that has been accumulated, the UK government is now beginning to cut back on spending through implementing contractionary fiscal policy.

Although this move is controversial, it is an effective way of decreasing the national deficit as a decrease in government spending now paired with potential future tax increases, such as the hike in corporation tax to 25% in 2022, will mean the UK government will have more money available to pay back debt repayments. Nevertheless, decisions such as cutting back on Universal Credit and suspending the triple lock for State Pensioners are regressionary as consumers are beginning to see rising prices.

All families will face higher energy and food bills in the autumn with those coming off fixed price energy contracts or cheap deals facing increases of up to 50% in their bills.

Lord Gavin Barwell, a Conservative who served as chief of staff to former prime minister Theresa May, warned that this rise in energy prices “definitely has the potential to become a crisis”

This paired with the fact that Economists are predicting a further increase in gas and energy prices paired with rising income and national insurance taxes will continue to squeeze the gap between peoples incomes and their expenditure,

Consequently, those on fixed incomes, such as individuals on State Pensions and Job Seekers Allowance, will see a reduction in buying power as a reduction in their disposable income paired with high inflation rates of 3.2% CPI will slowly erode these individuals ability to buy goods and services.

This means that some families will have to switch from normal goods to inferior goods, which, due to them being less nutrition, may place further pressure on the NHS, a health service that has been already stretched thin with over 5 million awaiting treatment. At the same time, once we account for the fact that inflation is predicted to rise to 4.0% CPI, and, that the poorest tenth allocated approximately 21.2% of their expenditure into food, gas and electricity compared with the richest tenth devoting just 9.5%, it is likely that, some families or individuals may be forced to cut back altogether. This will increase food poverty and heating poverty rates in the UK which is significant as during the COVID-19 pandemic alone, the UK’s biggest food bank, the Trussel Trust, has sent out a record 2.2 million food parcels.

It is predicted that in future, ‘Capital Economics’ believe that food prices will continue to rise by approximately 2.3% over the following two to three months.

By Spring 2022, the organisation states that this rise will eventually lead to the poorest tenth of UK households spending an additional 2.1% of their expenditure on those essentials such as food, gas and electricity, thus making the most vulnerable members of society, even poorer.


Written by Hubert Kucharski

Research compiled by Hugo Denage


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