In response to the ongoing cost of living crisis, GLAMOUR has launched a new cost of living series, taking an unflinching look at how the crisis has unfolded and what to do about it, from practical tips on how to support your community to first-person perspectives on how the crisis affects marginalised people.
We're all familiar with the basic responsibilities of adulthood: we must pay our rent on time; stay on top of bills; keep our fridges stocked and our petrol tanks full; as well as covering the cost of childcare and travelling into work. That's before we even take into account gym memberships, streaming subscriptions, and other necessities such as cleaning products, personal care items, and the clothes on our backs.
As we're dunked back into unarranged overdrafts, we're often quick to blame ourselves for our perceived budgeting failures; resolving to uninstall Deliveroo for good, swearing off after-work drinks, and ditching our morning lattes. While the onus has always felt as though it's on us (as consumers) to curtail our spending behaviours, the past year has facilitated a significant shift in our attitudes to these responsibilities. Amidst a surge in food prices, energy bills, and well, everything else, we're starting to consider that, maybe, we're not the problem.
According to Google Trends, searches for “cost of living” have increased from 15 data points in May 2021, to 100 in May 2022. Google searches for “cost of living crisis” have spiked in May 2022, as many of us grapple to understand what the crisis actually is and how it impacts us. With that in mind, GLAMOUR spoke to the experts to provide a detailed guide about the ongoing cost of living crisis.
The cost of living crisis is already here, but it’s far from over.
What is the cost of living crisis?
The Institute For Government describes the 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,” adding that it's being predominantly caused by “high inflation outstripping wage and benefit increases and has been further exacerbated by recent tax increases.”
Makala Green, author of The Money Edit (published by Yellow Kit) also notes that the cost-of-living crisis refers to “rising prices that cause disposable income (income left after expenses) to decline. We are experiencing the highest inflation in decades, which means the cost of living for many has become unaffordable.”
Some key terms to grasp here are ‘real disposable income’ and ‘inflation’. The former essentially refers to the money you have left after taxes (such as national insurance and student loan repayments) are deducted, and when benefits (such as Universal Credit or Disability Living Allowance) are added. Inflation, on the other hand, is the term used to describe prices increases over time. The rate of inflation is measured every month by the National Office for Statistics. You can see how the prices for goods and services have changed over time using this calculator.
What caused the cost of living crisis?
Laura Howard, finance expert at Forbes Advisor, advises that the cost of living is “essentially the result of a perfect storm.” She identifies the following factors which contributed to the crisis:
Covid-19: “Not just the economic fallout, but the subsequent surge in demand for manufactured products as various markets have reopened, which has had a knock-on effect of driving up prices.”
Rocketing energy costs: “Initially due to factors including a lack of wholesale gas supply following an unusually cold winter in 2020-21, then exacerbated by the tragic ongoing conflict between Russia and Ukraine – Russia being a major international gas supplier.”
The 'energy price cap’: “This refers to the amount that energy suppliers can charge customers every year who are on a dual-fuel (gas and electricity) standard rate variable tariff and use an average amount of energy. This figure is now an astonishing £1,971, which is set to rise again this October when the regulator Ofgem announces a new price cap.”
Food prices: "These have also been steadily climbing, due to factors ranging from changing global weather to a shortage of delivery drivers. A pint of milk, for example, cost 51p in April this year, compared to 42p in April last year, according to the Office for National Statistics (ONS).
Inflation: "[This is] a measure of the rising costs of goods and services. It’s based on a vast and virtual basket of goods which is updated each year to reflect changing consumer spending patterns. This year, meat-free sausages, canned pulses, sports bras, pet collars and antibacterial surface wipes were all added to the basket, while donuts, men’s suits and coal were taken out. The main categories these changing items fall under however, stay consistent. They include the fundamentals such as housing, transport, communication, health, and clothing. However, each category will be applied a different weighting every year.
“The ‘grass roots’ measure of inflation, known as the Consumer Prices Index (CPI), stood at 9% in the 12 months to April. For context, this is the highest recorded in 40 years, while the target set by the government is just 2%.”
When considering inflation, Laura advises that, “each household and individual will have their own ‘personal’ rate of inflation. For example, if you are a large-family household who does a big weekly food shop, uses a lot of energy at home and ferries the kids around in the car all day, the soaring cost of food, energy, and petrol is going to hit particularly hard.”
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What expenses have changed?
Makala Green advised GLAMOUR that the following expenses are increasing:
Gas and electricity: Laura Howard adds, “Earlier this week, UK energy regulator Ofgem said the typical household energy bill was set to rise by £800 in October, bringing it to £2,800 a year. Bills had already risen by £700 on average in April.” She also noted that, “Ofgem warned that 12 million households could be pushed into fuel poverty, where they are paying more than 10% of their household income on energy.”
House prices: The ONS reports that UK average house prices increased by 9.8% over the year to March 2022.
Rent: The ONS reports that private rental prices paid by tenants in the UK rose by 2.7% in the 12 months to April 2022, up from 2.4% in the 12 months to March 2022.
Fuel: Fuel prices in the UK have reached record highs in 2022, with RAC Fuel Watch reporting that petrol is now 173.02p per litre, whereas diesel averages at 182.58p per litre.
Food and non-alcoholic beverages: “Highly experimental” research by the ONS shows that “the lowest-priced [grocery] items have increased in cost by around as much as average food and non-alcoholic drinks prices (with both rising around 6% to 7% over the 12 months to April 2022).”
Furniture, household essentials and DIY maintenance: According to British Furniture Manufacturers, the “retail price of household furniture rose on an annual basis to April by 16.5%, a near-monthly high in ONS statistical records, only beaten by March when the rise was 17.2%.”
Clothing and footwear: According to Statistica, "The inflation rate for clothing and footwear in the United Kingdom reached 8.3 percent in April 2022, the highest inflation rate for this sector during the recorded time period."
Transportation: In March 2022, the highest train fare rises for nine years (a rise of 3.8%) came into force. Statistica reports that, “The Consumer Price Index for transport services in the United Kingdom was 132.9 in April 2022, compared to the 131.5 in the previous month. This indicates that since January 2015, prices in this sector have increased by 32.9 percent.”
Healthcare: “In April 2022, the Consumer Price Index for health products in the United Kingdom was 116.6, compared with 114.7 in December 2021,” reports Statistica, adding that, “The current index score indicates that the price of health products have increased by over 16 percent since 2015.”
It's not all bad news…
This research may be overwhelming, but Laura adds, “While the rising cost of living is a serious issue, it won't help to take the weight of the world on your shoulders. The jobs market, for example, is thriving – ONS data shows that there are more jobs than workers for the first time ever. So, there could be opportunity for a new challenge or even a pay rise."
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What is the government doing to help those affected by the crisis?
On 26 May 2022, the HM Treasury released a statement confirming that millions of UK households will be eligible to benefit from £15 billion of targeted government support to help with the rising cost of living. The support package will be partly funded through a 25% windfall tax on the “extraordinary” oil and gas firms' profits, which have increased in recent months.
The Chancellor of the Exchequer, Rishi Sunak, said, “We have a collective responsibility to help those who are paying the highest price for the high inflation we face. That is why I’m targeting this significant support to millions of the most vulnerable people in our society. I said we would stand by people and that is what this support does today.”
Every household in the UK will receive a £400 discount on their energy bills
As of October 2022, all UK households will receive a £400 discount on their energy bills: double what was originally promised in the Spring Statement. Unlike the initial “loan” (which was repayable over five years) this sum will not need to be paid back.
Eight million households on means-tested benefits will receive an extra £650 paid directly into their bank accounts in two lump sums
This includes all households receiving the following benefits: Universal Credit, Income-based Jobseekers Allowance, Income-related Employment and Support Allowance, Income Support, Working Tax Credit, Child Tax Credit, and Pension Credit.
The DWP will make these payment in two lump sums – the first from July, the second in the autumn. Claimants will need to be in receipt of one of these benefits, or have begun a claim which is later successful, as of 25th May 2022 to be eligible for the first of the two instalments.
Pensioners will receive a one-off payment of £300 this year
As pensioners (those over State Pension age between 19 – 25 September 2022) are disproportionately impacted by higher energy costs, they will receive a one-off payment of £300, in addition to the Winter Fuel Payment.
Around six million people who receive disability benefits will receive a one-off payment of £150 in September
This includes people who receive the following benefits: Disability Living Allowance, Personal Independence Payment, Attendance Allowance, Scottish Disability Benefits, Armed Forces Independence Payment, Constant Attendance Allowance, and War Pension Mobility Supplement.
These payments will be exempt from tax and will be paid directly into eligible people's bank accounts. You must have been receiving (or have begun an eventually successful claim for) one of these benefits as of 25th May 2022 to be eligible for this additional payment.
Here’s how to be kind to yourself during the cost of living crisis.
Is it enough?
Makala told GLAMOUR, “I believe [the new government support measures] are a step in the right direction as many people are financially struggling and require financial support. However, I feel the changes are focused on household bills, and there are still major increases that still need tackling, such as house and rent price rises and food.”
Laura notes that, "Every Chancellor likes to pull rabbits out of the hat – it should be part of the job description. And Rishi Sunak knew all eyes were upon him when he addressed the cost of living crisis, the spiralling cost of energy bills in particular. So, he went out of his way to deliver a spread of crowd-pleasing measures.
“On top of targeted relief for pensioners and those on means-tested and disability benefits, there was a surprise doubling, to £400, of the amount every household will see knocked off their energy bills in October, along with the removal of the requirement for it to be paid back over the coming years. But will the £15 billion assistance package – funded in part by a £5 billion windfall tax on 'public-enemy-number-one' oil and gas companies – prove adequate for those in the direct need?
“The fact that many households will qualify for more than one of the support measures means this can add up to a significant sum for a lot of people. Everyone gets the £400 off their bill, then they might get £650 for being on Universal Credit and a further £150 because they receive disability benefits – totalling a considerable £1,200.
“But then again, this has to be viewed in the context of just how much energy bills are rising - up 54% in April, to around £2,000 a year for an average household and expected to rise by at least a further 40% in October to around £2,800. That's a £1,500 increase in annual bills in little more than six months. The government help programme – albeit welcome – won't offset the price rise except for those with less-than-typical energy consumption.
“And it's also worth remembering that it's not just energy bills that are going through the roof - groceries, petrol, rent and mortgages are all getting steadily more expensive. Nothing has been done to help businesses with their escalating costs, so we can expect the prices they charge to rocket as well. The cost of living crisis isn't going to disappear in a puff of smoke, as much as the Chancellor would like it to.”
Your questions, answered.
For more from Glamour UK's Lucy Morgan, follow her on Instagram @lucyalexxandra.
