Any end in sight to the cost of living crisis

By Eve Pearce

Despite the recent news that unemployment has fallen to just over 2 million, and that the Bank of England may well, as a result, address inflation, many in the UK are continuing to struggle with poverty and the cost of living. While politicians are unsurprisingly keen to assign blame to each other, or take credit for minor achievements, the cost of living crisis is one that needs to be fundamentally addressed. In order to do so, taking an unbiased look at the causes of this problem is something that must be done by all political parties if we hope to have any real, lasting changes made to rectify the failings of the current systems in place. The problem is of course, a complex one - energy prices, housing, food, and transport all contribute to the issue, and while some changes are happening in the energy industry that could see long term benefits for the country as whole in terms of less emissions and cleaner fuel, whether this will affect prices remains to be seen.

The Origins of the Problem

Tracing the roots of the issue can be tricky at first, especially given the often conflicting statements made by both Labour and the Conservatives. Ed Milliband for example, has made the cost of living a sole focus of attack on the current government, often stating that the problems are as a direct result of the average wage being much lower, up to £1600 a year lower in fact , when compared with 2010. However, what Mr Milliband fails to point out, is that wage stagnation began under the previous Labour government.

Conversely, the Chancellor seemed keen to avoid the most recent figures on the crisis which are indeed a cause for concern, instead referring to more favourable figures from 2012, which suggest the problem is in fact minor at best. Some critics of the recent figures say that it’s too early to consider these recent statistics as a warning sign, and that they may in fact merely be a blip. While this is a perfectly viable argument, the reality for many of the UK’s poorer families seems to suggest otherwise.

The Financial Squeeze

According to the Joseph Rowntree Foundation, a single adult needs to earn just over £16,000 a year, after tax, in order to reach the minimum accepted living standards. The cost of living has been rising faster than inflation, which is the main reason for the financial strains that have been felt by those earning under or near this threshold. The effects have been further compounded by ever rising energy bills, which have been predicted to rise up to 50% in the next six years.

For the general public, especially those on the lower end of the earnings scale or the unemployed, this has also translated into growing problems for a number of sectors. UK car sales for example, have been on the downturn, and a number of people have even traded in car use for biking or walking. Fuel prices haven’t helped the matter, along with additional costs of insurance and general maintenance. That said, there are a number of discounted finances and services on offer for car owners that can ease the burden somewhat, and some providers have been quick to try and adapt to the current climate to attract savings focused consumers. 

Transport and car ownership is only one aspect, of course. Food prices have also risen, leading many to rely on food banks, and consumers focus on making as many savings as possible has been felt strongly in the food retail sector. A number of large UK supermarkets saw profits drift away over the Christmas period - again a likely indicator of consumers tightening the leash on spending as a result of the cost of living crisis. The supermarkets themselves blamed such a downturn on the economic situation, and despite slashing prices were unable to secure satisfactory margins during the period.

Will the Crisis Continue?

Despite the varying political stances, there are some noteworthy omissions from standard party lines that are worth pointing out. The wage stagnation under Labour could in fact have been crucial in keeping unemployment figures down, despite the economic downturn, according to the IFS. Additionally, the Chancellor may have been correct to sideline the 2013 figures, as according to the Bank of England we are likely to come out of the cost of living crisis in the next few years, with wages due to rise.

So far, the Bank’s predictions have been fairly on the money, so with any luck, the next few years will give way to much needed respite for those feeling the bite the most. However, care should be taken not to dismiss the issue entirely, as there are still millions in the UK living on or below the poverty line.