2021–present United Kingdom cost-of-living crisis
Since late 2021, the prices for many essential goods in the United Kingdom began increasing faster than household incomes, resulting in a fall in real incomes. This is caused in part by a rise in inflation in both the UK and the world in general, as well as the economic impact of issues such as the COVID-19 pandemic, Russia's invasion of Ukraine, and Brexit. While all in the UK are affected by rising prices, it most substantially affects low-income persons. The British government has responded in various ways such as grants, tax rebates, and subsidies to electricity and gas suppliers.
Definition[edit]
The Big Issue newspaper defines a cost-of-living crisis as "a scenario in which the cost of everyday essentials like energy and food is rising much faster than average incomes".[1] The think-tank Institute for Government defines the UK's cost-of-living crisis as "the fall in real disposable incomes (that is, adjusted for inflation and after taxes and benefits) that the UK has experienced since late 2021".[2]
Effects and timeline[edit]
Based on an Office for National Statistics (ONS) survey performed between 27 April and 22 May 2022, 77% of UK adults reported feeling worried about the rising cost of living, with 50% saying they worried "nearly every day". A separate ONS survey taken from 25 May to 5 June found 52% of respondents had cut back on their energy use.[17] While rising prices have affected all social classes, the poor have been impacted the most.[10] According to a survey by the Food Foundation think tank published in February 2022, one million UK adults went a whole day without eating over the past month.[18]
Inflation began rising sharply in 2021, affecting a wide range of goods and services. Transport costs have been especially affected, but also many others, including costs for food, furniture, household items, electricity and clothing.[10] The Financial Times reported in May 2022 that the crisis caused UK consumer confidence to fall to its lowest level since 1974.[19] In June, charities had reported the crisis is affecting people's mental health, with one publishing a survey where 9% of responding parents had said their children had begun self-harming.[20][21]
On 10 November 2022, nurses and other medical personnel across the NHS voted to strike, under the Royal College of Nursing. The nurses stated this was due to failing wages, inflation, overwork, and underfunding. The industrial action affects NHS hospitals throughout the UK. Nurses are still expected to work certain days at reduced-capacity to ensure the NHS is still operational.[22][23][24]
The Office for National Statistics (ONS) stated on 11 November that business investment fell during the three months to September and was below the pre-pandemic levels. Gross domestic product fell during the three months to September due to a decline in manufacturing "across most industries" according to the ONS.[25]
On 8 December 2022 The Guardian reported that according to research by the Joseph Rowntree Foundation, over 3 million UK low-income households could not afford to heat their homes. According to the research by the foundation, roughly 710,000 households had difficulty paying for food, heating and warm clothing. The foundation urged the government to increase Universal Credit. A government spokesperson said that the support of the most vulnerable remains a priority and that millions of the most needy people are being given at least £1,200 in direct payments to protect them against rising prices in addition to the £400 being given to each household towards energy costs. The spokesperson said that the support also includes a winter energy price guarantee worth approximately £900 for a typical household and a household support fund to help people with essential costs and that the chancellor had announced further efforts to support those most in need next year.[26]
The ONS reported that in the year to September 2022 there was a 22% increase in shoplifting. In response to the problem, some supermarkets began to roll out new retail loss prevention systems, requiring customers to scan their printed receipt on an optical scanner as proof of purchase before they can exit the store. The systems have attracted some negative public reaction.[27][28]
The Joseph Rowntree Foundation said their research showed that hundreds of thousands of households could not afford to protect themselves from cold and that prices of essentials were rising steeply with energy bills and were nearly double the level the previous winter.[26] A briefing from the Department of Health and Social Care (DHSC), detailing the plans they have made to take on thousands of volunteers to counteract staff shortfalls during the 2022/23 winter, included a warnings about the impact on hospital admissions that the cold weather, increased fuel prices, and cost of living might have, especially for the elderly.[29]
On 5 September 2023, Birmingham City Council, the largest local authority in Europe, issued a Section 114 notice declaring itself effectively bankrupt.[30]
Responses[edit]
Government[edit]
Early government responses to rising inflation included a 6.6% rise in the minimum wage, which was announced in 2021, and came into effect in April 2022. The UK government intensified its efforts to respond to the cost-of-living crisis in May 2022, with a £5bn windfall tax on energy companies to help fund a £15bn support package for the public. The package included every household getting a £400 discount on energy bills, which would be in addition to a £150 council tax refund the government had already ordered. For about 8 million of the UK's lowest-income households, a further £650 payment was announced. Additionally, pensioners or those with disability would qualify for extra payments, on top of the £550 that every household gets, and the £650 they would receive if they had a low income.[10][31][32][33]
In June 2022, business secretary Kwasi Kwarteng ordered an urgent review of the motor fuel market to complete by 7 July, to see if consumer prices were excessively high.[34] The measures were called insufficient by many people and organisations, including outgoing Prime Minister Boris Johnson, with the Bank of England predicting that the UK would enter recession by 2023.[35][36]
Johnson's successor Liz Truss announced a package of subsidies for rising energy bills with an estimated potential cost of up to £150 billion, depending on future wholesale prices.[37] The main piece of this package was the Energy Price Guarantee, which would mean that a UK household with "average energy usage" would pay no more than £2,500 a year on energy, although this was widely misinterpreted as Truss stated in media interviews that "nobody would pay more than £2,500". She later clarified this, while ruling out introducing a new windfall tax on the profits of energy producers and suppliers.[37][38] The subsidies were initially planned to last for two years for consumers and six months for businesses, but in October the new Chancellor Jeremy Hunt said that the package would continue until April 2023 and that from this date support would be targeted at "the most vulnerable."[39]
After his appointment as prime minister in October 2022 following Truss' resignation amid an economic and credibility crisis caused by the September 2022 mini-budget proposed by Truss and Kwarteng, Rishi Sunak continued the package of subsidies for rising energy bills. As chancellor, he provided some funding to help vulnerable people cope with the rising cost of living.[40]
In October 2022, the Scottish Government introduced an act to freeze rents and establish a moratorium on evictions in Scotland for both the private rented and social sectors.