Cost-of-living crisis: How the squeeze has tightened its grip on households
Some households have little room for manoeuvre in their budgets as living cost pressures have worsened.
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Your support makes all the difference.The squeeze on households’ finances has tightened in recent months, leaving some with little or no room for manoeuvre.
According to figures released by Nationwide Building Society this week, households made fewer spending transactions in April – but the overall amount they spent did not drop – in what the society described as a “clear sign” of the impact of rising prices.
Last week, the Independent Food Aid Network (Ifan) said people unable to afford essentials are increasingly asking for food they do not need to cook or refrigerate because of rising energy prices.
Office for National Statistics figures have shown inflation soaring to a 40-year high, reaching 9% in the year to April – a figure which is expected to hit double digits in the coming months.
Rising living costs do not affect everyone equally, with those on lower incomes often spending a higher proportion of their budgets on essentials. People on fixed incomes, such as pensioners, may be at particular risk of finding they have no wiggle room in their budgets.
A full tank of unleaded is now close to £94 and diesel almost £100
A string of bill increases took place in April, including rises in council tax, a 1.25 percentage point national insurance (NI) increase to help pay for health and social care, and a rise in the energy price cap.
It has also been suggested that the typical annual household energy bill could jump by as much as £800 in October.
The next change in the energy price cap is due to take place in October – and industry regulator Ofgem recently suggested it may soar to somewhere in the region of £2,800 for an average household.
The current cap for the average household is £1,971 for those on default tariffs paying by direct debit. The current cap jumped by £693 in April, due to rapidly rising wholesale energy costs.
To help households cope, on Thursday, Chancellor Rishi Sunak announced a £15 billion support package, including a one-off £650 payment to more than eight million low-income households on Universal Credit, Tax Credits, Pension Credit and legacy benefits, with separate one-off payments of £300 to pensioner households and £150 to people receiving disability benefits.
Mr Sunak also announced that the energy bills discount due to come in from October is being doubled from £200 to £400, while the requirement to pay it back will be scrapped. This means households will receive a £400 discount on their energy bills from October.
The typical cost of filling up the car has also jumped to record levels, just as many people are spending more time heading to and from the office after the pandemic lockdowns.
RAC fuel spokesman Simon Williams said: “A full tank of unleaded is now close to £94 and diesel almost £100.
“While these prices are bad enough, drivers in some areas where there isn’t much competition will be seeing far higher, more eye-watering figures on forecourt totems.”
House prices have also continued to hit a string of record highs, making life tougher for those trying to get on the property ladder.
According to Rightmove, average asking prices for homes across Britain have soared by £55,551 in the past two years, compared with a £6,218 increase in the two years before the coronavirus pandemic.
A lack of available properties has been helping to boost prices.
One area of spending where people may find their costs have actually gone down recently is home and motor insurance.
According to the Association of British Insurers (ABI), in the first quarter of 2022 the average price paid for buildings insurance was £225. This was a 7% annual fall and the lowest average price since the ABI started collecting this data in 2012.
The average price paid for contents insurance, at £114, fell by 11% annually. Like buildings cover, this stands at its lowest since ABI started collecting the data.
The average price paid for comprehensive motor insurance in the first quarter of the year was £416.
This was a 5% drop over the year compared with the first quarter of 2021, the ABI said.
But in a worrying sign of the times, insurance giant Aviva has said it is expecting to see more fraudulent insurance claims, especially on home, small business and liability insurance policies, as cost-of-living pressures bite.