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Every family is different but essentials inflation hits worst-off hardest

Every family has a different cost of living and a different rate of inflation. Yet our work with clients shows inflation hits the worst-off hardest. UK-wide research by official statisticians, poverty campaigners and independent think tanks is conclusive on the point.
2023 Campaign Reflection 2) Cost of Living

Two years ago the best-selling food writer and activist Jack Monroe was celebrating. Her campaign for fuller official recognition of different inflation impacts was working. Now the Office for National Statistics is releasing Household Cost Indices showing substantial differences.*

In its latest research Joseph Rowntree Foundation reports the lowest-income households facing higher-than-average inflation. as they spend a higher proportion of their income on essentials such as food.**

Resolution Foundation echoes the point. They say the average increase in annual household food bills since 2019-20 is a remarkable £1,000. But poorer households, who spend a greater share of their budgets on essentials, have been hit hardest.***

For many local people we helped in 2023 price inflation in essential goods and services caused serious debt problems. Will policymakers understand and act in 2024 and beyond?

Looking back

Throughout 2023 we monitored the problems causing hundreds of clients to fall into debt. Most common were housing, energy and food poverty, council tax payment and obtaining entitled benefits on time and in the right amount. Rising costs left many households with a ‘negative budget’, their income falling short of essential outgoings.

In response to our policy mission we focused on the biggest issues: energy prices and their consequences; food inflation at truly frightening levels; and housing with renters particularly hard-hit with many kinds of debt. We also welcomed critical government support in the Energy Price Guarantee, Household Support Fund, and cost of living payments for those on low incomes.

Residents affected by the crisis but escaping its most serious problems may think our messages wearyingly repetitive. Nothing is ever enough, we and other charities seem to say. Regrettably though it’s true and likely to continue so while long-term issues (such as shortage of affordable housing) remain unsolved. Until then, we seem likely to go on calling for more and better targeted support; that’s the best, perhaps only, way to protect people in greatest need in the absence of a more generous social safety net.

CoL Issues 2023
Unable to afford basic household costs, hundreds of clients had built up large debts. Many also needed emergency crisis support.
Looking forward: predictions

Moving into 2024 we expect inflation to continue falling with fuel prices (fingers crossed for no more supply interruptions). But as national Citizens Advice policy head Morgan Wild said last month, price rises for many essentials are now “baked-in”.

The CA policy team has made three predictions for household budgets and the cost of living this year:

  1. Cost-of-living crisis will get worse at the start of the year. Energy bills and private rents rise. Mortgage costs stay high.
  2. There is some respite mid-year. There are rises in the minimum wage, local housing allowance and all benefits. Energy bills fall significantly.
  3. At year-end the crisis will be far from over. In October 2024 energy costs will be nearly 30% higher than in Oct 2021. Private rents will still be still rising. We have heard of no further cost-of-living payments for winter 2024/25.

At CAEE we will always follow these core cost-of-living issues in meeting our local Citizens Advice Research & Campaigns mission; supporting national activity and comparing local experience will both be important. This year however we will focus as much on our strong links with local groups and organisations. Watch this space.

Less visible pressure

High prices on the basics will always be in the headlines. Behind our new focus is growing awareness of a less visible pressure on the least well-off. Erosion of local public services. This month the head of the Local Government ­Information Unit, Dr Jonathan Carr-West, told the Mirror newspaper how town hall chiefs….

….have never been so worried about the future of the services they provide, ­especially for the ­vulnerable in society. Care homes, buses, libraries, bin ­collections, street sweeping and lights face cuts as ­councils are further squeezed.

We could add other local government services where reduced council budgets are taking a toll. Where the impact is on homelessness services, libraries, youth and children’s services or home care, it’s the vulnerable in society who most often suffer. Meanwhile cuts to the courts and probation service are felt most at local and household level.

We hope by working together with councils, charities and other providers we can help improve policy and delivery where the need is clear.
2023 Campaign Reflection 2) Cost of Living

* In September 2023 (in its most recent release) the Office for National Statistics said the difference in annual rates for low- and high-income households was small (8.2% and 8.3% respectively). But over the period April 2022 to June 2023, there were substantial differences: for low-income households inflation peaked at13.5% compared with 11.5% for high income households. Household Cost Indices, ONS, 04/12/23

** “As we enter 2024, the average increase in annual household food bill will remain £1,000, and the average energy bill £760, higher than they were pre-pandemic, as Figure 1 shows. Everyone has to heat their home and put food on the table, so the core of the cost of living crisis has affected us all – though poorer households, who spend a greater share of their budgets on essentials, have been hit hardest.” From merry Christmas to a messy new year, Resolution Foundation, 29/12/23

*** “But millions of people across the UK remain in the grip of a cost-of-living crisis; already-high prices continue to rise while increasing rents and interest rates, along with a deteriorating job market, are increasing the financial pressures on families across the income distribution, but on low income families in particular. The lowest-income households continue to face higher-than-average inflation rates as they spend a higher proportion of their income on essentials, such as food. Food inflation remained at 10.1% in the year to October 2023, even as overall inflation fell to 4.7%.” UK Poverty 2024, JRF, 25/01/24

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