Britain is experiencing a serious cost of living crisis, with inflation at a 30-year high, according to the latest figures. Significant hikes in energy bills and the increase in National Insurance contributions are also combining to make life tougher than ever for householders.
While one factor alone would be sufficient to force consumers to tighten their purse strings, poverty action groups fear the combination of all three will hit people hard. In particular, the UK adults already estimated to be living in relative poverty could be tipped over the edge by the latest round of increases.
The number of residents classed as having low income rocketed from 11.7 million in 2019 to 14.5 million in 2020, representing 22% of the population. This includes 4.3 million children, according to the government document, Poverty in the UK.
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Energy bills
The upcoming hike in energy bills, which will occur in April, may see the price cap increase by 50% or more. Bills will rise across the UK, with householders losing out on cheaper variable energy deals.
While savings of up to £171 a year were possible among the top ten cheapest deals in 2021, under the new regulations, there will be a difference of only around £2 a year in future. Customers will find out on 7th February exactly how much prices will increase from April.
National Insurance increase
National Insurance contributions will also rise in April by 1.25%, as Prime Minister Boris Johnson’s solution to put extra funding into health and social care.
Under the plans, employers, employees and the self-employed will pay an additional 1.25p in the pound for NI for one year. From April 2023, the extra tax will be paid via a new Health and Social Care Levy.
The poorest members of society, who earn less than £823 a month, won’t have to pay either NI or the new levy. However, poverty charities fear it is the people on a relatively low income who will suffer most.
Government ministers, including some Conservatives, have urged Mr Johnson to think again. They suggested the rise should at least be delayed in light of the increase in energy bills and the high inflation rate. However, the PM is forging ahead with the NI rise.
High inflation
UK inflation has risen to its highest level in around 30 years, rocketing to 5.4%. It is being driven higher by increasing prices for food, clothes, furniture, housing and more. This is creating an even more severe cost of living crisis, putting pressure on the Bank of England to increase interest rates when it next meets in February.
Even worse news could be on the horizon: economists believe inflation could reach 6% in April. In economic terms, inflation refers to a general rise in prices and a fall in the buying power of money. Shoppers get far less for their money, and it can be very damaging for individual finances.
How can people cope?
There are a few measures in place to support people in fuel poverty, such as the Warm Homes Discount. This means people who are struggling on a low income could get £140 off their electricity bill for winter 2021 to 2022. The money is a one-off discount paid between October and March. For most, sadly, the stark reality is they will be forced to cut down on their heating to reduce bills.
Anti-poverty charities are lobbying the government to help people in the UK who are having to choose between heating their home and eating. Since the £20 a week Universal Credit covid boost ended in September 2021, families have been struggling even more.
The Northeast Child Poverty Commission warns families are dealing with a toxic combination of low incomes and rocketing household bills. There are fears that average annual energy bills of £1,277 in October 2021 could be hiked as high as £1,865 in April, plunging many households into “very deep poverty”.
Unexpected expenses
While it’s difficult to find a direct solution to the problems faced by millions of people across the UK, Logbook Loans 247’s loans service could be a useful option in the event of unexpected expenses that arise.
A logbook loan secured against your vehicle is intended to tide you over a tough patch. Unlike some other companies, we don’t impose early settlement penalties and you will still retain full use of your vehicle.
Contact Logbook Loans 247 for further information.
