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Soaring inflation may be impacting communities around the world,
but in Britain the squeeze is coming from all directions – and as
usual the poorest are feeling it the most.
Calling it the ‘year of the squeeze,’ Britons are in the throes
of a cost-of-living crisis, with new data showing inflation jumped to
5.4 percent in December, its highest
rate in 30 years.
The widespread increase in the cost of most goods and services are
expected to jump even higher in the spring to levels in excess of 6
percent. As price inflation outstrips income inflation, many families
are experiencing a fall in real income.
The soaring cost of food, fuel and energy – which are forecast
to rise by about 50 percent to as much as £2,000 a year in April
– have been coupled with cuts to the welfare benefit Universal
Credit (UC) and rises to national insurance contributions, which are
set to increase by 1.25 percent at the start of the new tax year in
Like the way the global financial crisis of 2008 hit
the world’s poorest the hardest, it is the lowest income
households in Britain that are bearing the brunt of the current
Tory government accused of creating the cost-of-living crisis
By making unnecessary cuts to benefits while concurrently rising NI
and allowing the price of household energy to hugely increase, the
Conservative government has
been accused of creating the “cost of living crisis.”
On Oct. 6, 2021, brutal cuts to welfare benefits saw low-income
claimants lose the £20-a-week uplift to UC that was introduced as a
means of helping struggling families get through the pandemic.
shows that almost half of UC claimants don’t think they can
live on £20 less each week.
The UC cut is compounding the cost-of-living crisis for many living
on shoestring budgets. But many factors are at play, resulting in
soaring living costs that impoverished families simply cannot afford.
Britain’s departure from the EU’s single market just over a year
ago has been quietly reshaping patterns of trade with significant
effects on the price of goods. Data
from the British Retail Consortium and the research group NielsenIQ
confirms that rising prices in shops are a result of driver shortages
and the cost of Brexit-induced red tape.
Further price rises, and a shortage of products from Europe in the
supermarkets, are likely to occur in the coming months. The six-month
grace period to declare the origin of products entering the UK from
the EU ended at the end of 2021, with experts warning of delivery
delays and additional costs for bringing products into the UK.
With the post-Brexit customs law, known as Rules of Origin, now being
implemented, many are cautioning that “things will get worse.”
“The longer and more costly process would lead to higher costs for
the consumer as things become more time-critical and agents have to
work harder to clear goods on arrival, and not relying on that
six-month breathing space,” said
the tax advisor Simon Sutcliffe. “This means that customs agents
will raise their prices which will be passed on.”
Between 2010 and 2020, successive Conservative governments sold
austerity like it was a requisite response to the 2008 financial
crash. During the decade of austerity, unemployment may have fallen
but new jobs that emerged were notoriously low paid. As a
consequence, debt reached mountainous levels in the austerity years.
In March 2020, as the first lockdown was enforced in Britain, each
household owed an average of £15,385, not including mortgages.
Then, cruelly, the effects of the Covid-19 pandemic dug in, widening
the gap between rich and poor. Studies
found that deprived areas fared much worse during the health
crisis, largely due to people living in poor areas being likelier to
have experienced financial insecurity and a higher uptake of
In another twist of the knife to the poorest families, cuts have been
made to welfare pay-outs, leading Britain’s welfare system to be
described as ‘unfit for purpose.’
An urgent need to reform
With millions of families struggling to make ends meet amid the
spiraling cost-of-living crisis, experts are urging for an urgent
reform of the benefits system.
A two-year study by York and Birmingham universities and the Child
Poverty Action Group documented the lives of 150 families on low
incomes. The ‘Covid Realities’ study said the pandemic exposed
and exacerbated existing problems with the benefits system.
“Our social security system is currently ill-suited to protect
people from poverty, and to provide individuals with some level of
security as they navigate what are often temporary challenges in
their lives – for example, the loss of a job, relationship
breakdown, parenting and care work or ill health,” said
Ruth Patrick, a senior lecturer in social policy at York University
and leader of the research programme.
To help combat the crippling financial issues millions of families
are facing in Britain, the opposition party is calling for a
“fundamental reform” to the benefits system.
Labour is also calling for a cut to VAT on energy bills and an
expansion of the warm home discount scheme, which provides eligible
applicants with a one-off discount on energy bills.
Jonathan Ashworth, shadow work and pensions secretary, said: “Years
of Tory economic incompetence have landed working people, families
and pensioners with rocketing heating bills, punishing tax rises,
rising prices and the highest inflation for 30 years, which will mean
a real-terms cut in the support people rely on this April. Coming on
top of the Universal Credit cut, this will cause real hardship for
However, for some thinkers such measures do not go far enough.
Two leading UK think tanks, the Joseph Rowntree Foundation and the
Social Market Foundation, say urgent action is needed in the form of
The Social Market Foundation said it believes the government should
bypass overcomplicated solutions to the cost-of-living crisis and
provide a more simplified solution: making one-off cash payments to
the millions of households in Britain that are having to choose
between heating or eating this winter.
SMF’s chief economist, Dr. Aveek Bhattacharya, said the Chancellor,
Rishi Sunak, should just “write millions of cheques.”
Bhattacharya said he believes the UK should model an immediate
support system on the US stimulus payment program that was available
to eligible claimants during the pandemic.
During 2020, the US government distributed more than $400 billion in
stimulus payments amid the health crisis, helping
lift around 11.7 million people out of poverty, according to the
Supplemental Poverty Measure (SPM).
Bhattacharya is now
calling for similar measures to be introduced in the UK, stating:
“The government should avoid the temptation to over-complicate its
response and muddle its environmental objectives by subsidising
“Instead, it should make direct cash payments to households and
leave them to figure out how best to address their needs. A ‘cost
of living bonus’, with a higher payment for those on low incomes,
would do a lot to help struggling families and clearly demonstrate
that the government is on their side.”
Similar demands are being made by the Joseph Rowntree Foundation, a
think-tank aimed at inspiring social change through research, policy
Pointing to its own research that some 1.8 million children in
Britain are being brought up in deep poverty – meaning that a
family’s household income is so low it cannot afford to cover
essential basics – JRF says the escalating numbers should “shame
Kate Schmuecker, deputy of policy and partnerships at JRF, has
called for immediate emergency payments for people facing
financial hardship to help them through the coming months.
“The case for targeting support to help people on the lowest
incomes could not be clearer. But this must go hand in hand with
urgent action to strengthen our social security system, which was
woefully inadequate even before living costs began to rise,”
“Our basic rate of benefits is at its lowest real rate for 30 years
and this is causing avoidable hardship. The government must do the
right thing and strengthen this vital public service,” she added.
“Rising energy prices will affect everyone, but our analysis shows
they have the potential to devastate the budgets of families on the
lowest incomes. The government cannot stand by and allow the rising
cost of living to knock people off their feet.”
Beyond distributing immediate payments and reforming a broken welfare
system, alongside capping the price of essential items, pay rises is
another solution to help lessen the cost-of-living crisis burden.