Households across the UK are focused on the tips they can implement to help save money
In April, we all saw and felt the sharp rise in energy prices, National Insurance and petrol. It has affected millions of us across the country, a kind of perfect storm of personal financial squeezes that have a direct impact on our living situations. It’s a topic we have talked about before: Last time, we considered the potential effects the rising cost of living would have and the steps the government could take to prevent some of the more disastrous consequences.
This time, we’re looking at the reality of the situation, including how the government has responded and the real-life effects that the cost of living crisis has had on both regular Britons and businesses.
What is the government doing about the cost of living crisis?Following several small and uncertain contributions from the government to ease the pain of the increased cost of living crisis in low-income households, it’s clear that the problem has outgrown the government’s meagre generosity.
Defence Minister James Heappy noted: “The cost of living is getting to such a point now where even people on good wages are struggling to make ends meet and they are looking to the government to help them with solutions.” But it seems Boris Johnson and his cabinet are in no rush to tackle the crisis. In late April, reports showed that the Prime Minister would be chairing a committee ‘in the next couple of weeks’ to discuss ‘a number of ideas’ that could help households in the UK deal with the rise in costs of everything from National Insurance to council tax – but without relying on an increase in government spending.
Similarly, Rishi Sunak, the Chancellor of the Exchequer, did not take advantage of the “post-Brexit freedom” to scrap VAT on energy bills, instead offering a small loan that households could pay back over five years. In addition, ministers continue to avoid the reality that Brexit has exacerbated rising costs – worsening the cost of living rather than easing it as was claimed during the 2016 leave campaign.
Consequences of the crisisThe first quarter of 2022 has hit hard. From low-income households to businesses and those earning a good wage, there are few people in the UK that haven’t witnessed the effects of the cost of living crisis. In fact, almost 9/10 British adults have said that their living costs have increased – though of course, the effects of this is more devastating for some than others.
A survey by The Office for National Statistics has reported that 25% of respondents were struggling to pay their bills, and 17% had turned to loans or borrowing on credit cards to make ends meet. Those most affected are low-income households who are facing income cuts due to increased National Insurance contributions, and less disposable income due to the rising cost of household bills. It’s also believed that this is the fastest hike in the cost of materials and energy since 1979, and the biggest drop in UK living standards since the 1950s.
Similarly, UK grocery bills have increased by 5.9% despite supermarket giants like Tesco having previously reported some of the greatest ever profits. However, backlash from these reports, as well as the heightened competition for supermarkets to win over customers who are seeking lower prices for their weekly shopping essentials, has led some supermarkets to announce a cut in food prices coming in the near future.
This should ease the strain on households by returning weekly food shops to a semblance of their pre-crisis prices, and help supermarkets regain customers who had been turning to budget options like Lidl and Aldi to cut back on costs.
However, it’s the broader retail sector – which was only just creeping back towards pre-pandemic level profits – that is feeling the burn of the public’s tightened purse strings as sales fell by 24% in April. Food, fuel, energy, and taxes are expenditures that cannot be avoided. And the dent is being noticed in the service and retail industries that most customers view as a luxury rather than an essential.
Coming together to make a differenceNow, households across the UK are more focused than ever on the tips and tactics they can implement to help save money. From budgeting to cutting back on energy usage to taking advantage of coupons and offers, there are many ways to think about money more sensibly and strategically – both now and in the future.
With 59% of Brits now believed to be actively budgeting to survive the cost of living crisis, banks and money-saving websites are offering up advice for reducing costs at home. Some families have stopped using their oven while others are turning to layers of clothing to stay warm rather than turning on the heating.
It sounds extreme, and for many these options aren’t feasible. But it shows the extent of the problem for normal working people in the UK. Many of those on low-to-medium incomes are taking measures like turning off the lights, cutting down on the weekly food shop, and walking or car-sharing rather than driving.
While others are cancelling subscriptions like streaming services, gym memberships, renting movies online rather than paying for cinema tickets, cooking at home rather than treating themselves to takeaways, meals out, and grab-and-go lunches at the office. It’s these cut-backs that are causing the rippling effects that can already be seen in the service and retail industries.
This further consequence of the government’s failure to address the issues people are facing means that the economy could enter a period of recession too, and if that then starts to lead to businesses closing and job losses, then we could end up in a downward spiral lasting far longer than it should have. Instead of telling people not to ask for wage increases, the government could instead be investing in green growth to drive activity. They could also put more money in people’s pockets today by reversing the National Insurance rise and put up pensions and benefits by bringing forward some of next year’s inflation linked increase.
Here at Great Western Credit Union, we believe that we’re better off together. We’re continuing to support members with their financial needs, including with affordable small-sum loans that are helping many smooth the extra pressure that comes with a higher than expected bill. In addition, we’re helping people to build back in the most sustainable and environmentally responsible way possible, as the money from interest directly benefits local people, businesses and economies. In choosing to join us, people are creating a place where they, their friends and neighbours can develop and thrive across South West England and make a positive difference.
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