The UK has just seen its biggest increase in living costs in at least 13 years
(Bloomberg) — The cost of the most basic standard of living has jumped by 20% in Britain as the country faces the biggest squeeze on household budgets in a generation.
That’s about six times the pace of the average annual increase each previous year since 2009, according to a report published Friday by researchers at Loughborough University and funded by the Joseph Rowntree Foundation.
The situation is only set to worsen in the near future, with Goldman Sachs estimating that inflation could soar past 20% next year if natural gas prices don’t ease. As price increases outpace income growth, more families will fall behind on what they need to get by without a fundamental reform of the social security system, according to the report.
“It’s really hard to understate the significance of this,” said Abigail Davis, one of the authors of the report. “It’s just looking like it’s going to be harder and harder really to cover the most basic of essentials — we’re not talking anywhere near the standard where you feel like you can participate in society,’’ she said.
Members of the public and researchers worked out the minimum budgets people should have for necessities and being able to meaningfully participate in society, ranging from healthcare costs to birthday presents for friends and family. They concluded that in April 2022 a single person of working age would need to earn 25,500 pounds a year to cover the basics of an acceptable standard of living.
That’s 37% higher than what someone would earn working full time on the national living wage. The jump from last year is twice the official rate of inflation, partly because of changing priorities after the Covid pandemic but also due to the particularly rapid increase in the cost of essentials, such as energy and food that take up a larger part of budgets for poorer households.
The dip in real disposable incomes over the next two years would pull 3 million more people below the poverty line.
The gap between people’s incomes and what they need is setting up problems for the future, from worsening health outcomes to educational outcomes, said Davis. “If you’ve got a generation of children of whom a large proportion could be growing up in a home where they don’t have enough money to heat the house, or put food on the table, how is that going to play out?” she said. “It just seems like an avalanche almost poised and waiting to happen, and it needs some serious fundamental intervention to try and shift things back the other way.’’
The figures add to a brewing sense of crisis for Britain’s next prime minister, who will be revealed next week as current incumbent Boris Johnson steps down. The proposed policies of the two final contenders, former Chancellor of the Exchequer Rishi Sunak and Foreign Secretary Liz Truss, have been criticized for a focus on tax cuts rather than support for families struggling with their bills.
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