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Five ways the cost of living is rising – and how to get help if you’re struggling

Rising prices are squeezing millions of households. We’ve broken down exactly what’s changing – and where to get help during the cost of living crisis.

The cost of living crisis is showing no signs of letting up as new figures show inflation hit a 40-year high of 9 per cent in April.

This means that the cost of everyday goods is approximately 9 per cent higher than this time last year. 

The crunch has plunged millions of households into hardship, with reports of food banks running low on donations, people skipping meals and households taking desperate measures to avoid using their heating systems at home.

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As the new figures were published, Citizens Advice warned that “the warning lights could not be flashing brighter” for the government to provide more support to people facing extreme hardship. 

Though the cost of living crisis has been ongoing since last year, the war in Ukraine has exacerbated rising costs, with supply chains interrupted and western countries scrambling to reduce exports of oil and gas from Russia. 

In March, experts warned that Britain was heading for the worst fall in living standards since the 1950s, with 1.3 million people facing “absolute poverty”.

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With so much changing so quickly, it can be difficult to keep track of what costs are rising and why – so here’s the five main increases in everyday prices, and comprehensive advice on how to get help with paying them. 

What changed on April 1?

Prices have been rising steadily since late last year due to a variety of factors, but in April 2022, a number of changes led to sudden increases in costs for millions of people. These changes were: 

  • Ofgem increasing the energy price cap by 54 per cent, meaning a nearly £700 annual rise in bills for those who pay by direct debit
  • A national insurance increase – dubbed the health and social levy by ministers – of 10 per cent, which experts warned would affect the lowest earners the most
  • Council tax rising by around 3.5 per cent, meaning those in band D could face paying around £2,000 annually
  • A freeze on the income tax threshold, meaning a real-terms cut in take-home earnings for most
  • Water bills rising by an average 1.7 per cent
  • Lateral flow tests will no longer be free for everyone in England, to be followed by the rest of the UK in coming weeks

The culmination of overnight changes is likely to result in a “living standards catastrophe”, economic researchers warned

Changes that also came into effect were:

  • A benefits increase of just 3.1 per cent, in the face of inflation which could hit eight per cent
  • The biggest hike in rent prices for social housing tenants in more than a decade
  • An increase in the National Living Wage – the minimum wage for over-23s – which is too small to compensate for the rise in living costs, amounting to a real-terms cut for some
  • A rise in VAT for hospitality businesses, which will be passed onto customers in the form of higher price points

And to top it all off, MPs gave themselves a pay rise of £2,000 per year, to £84,000. It’s a 2.7 per cent increase, in line with average public sector pay and lower than the percentage increase in universal credit, but will still be a thumb in the eye to those struggling to make ends meet.

What is a cost of living crisis, and why is it happening?

A cost of living crisis materialises when the prices of everyday essentials such as heating costs, food and fuel are rising faster than average household incomes. 

The increase in the costs of everyday goods is measured by inflation, which simply records how fast the rate is rising year-on-year.

In April, inflation hit yet another high of 9 per cent, meaning that the cost of everyday goods is now 9 per cent higher than this time last year. 

The current cost of living crisis is particularly acute because a variety of different pressures are pushing up the rate of inflation.

This means costs are higher across the board, from food to petrol and energy bills, rather than prices rising in just one area.

Some of the factors driving the current spike in prices include: 

  • High demand for oil and gas since the beginning of 2021 coupled with uncertainty over supply due to the Ukraine conflict pushing energy prices up across the globe. This has led to higher costs for energy companies and subsequently, their customers.
  • Government support offered during the pandemic, such as reduced VAT rates in hospitality, ending.
  • Shortages in staff across a number of sectors including hospitality and transport. This is partly due to the pandemic but also compounded by Brexit, which saw many foreign workers leave the country. 
  • Shortages of some goods due to supply chain disruptions across the globe.

The impacts of the cost of living crisis are being felt globally, but government policy can affect how badly ordinary households are affected.

In France, for example, a 4 per cent cap on energy meant that household energy bills have only risen by a maximum of 4 per cent, forcing state-owned energy company EDF to bear the brunt of increased purchase costs.

In the UK meanwhile, the energy price cap rose by 54 per cent in April, adding hundreds of pounds to monthly energy bills for millions of households. 

Energy bills 

The energy crisis has impacted countries around the world due to demand for oil and gas outstripping the supply available.

This has meant the cost of purchasing oil and gas has generally increased for energy suppliers, and in the UK, the brunt of these costs has been passed along to ordinary people in the form of higher energy bills

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In spite of some ministers blaming increased costs on the war in Ukraine, the energy crisis was brewing long before Russia’s invasion in early 2022. 

The conflict has, however, pushed up prices further due to instability and uncertainty over supply chains and a scramble by western countries to avoid oil and gas imports from Russia. 

At the start of April, the removal of the energy price cap meant that bills rose by up to 54 per cent for millions of households in the UK

Those who are on default tariffs have seen increases of £693 from £1,277 to up to £1,971 per year, while prepayment customers have seen an increase of £708 from £1,309 to up to £2,017.

Normally, customers facing increases in energy costs would be able to shop around for better deals, but options are now limited due to the fact that all suppliers are facing higher purchase costs. 

The crisis created chaos for energy suppliers on March 31 – with nearly all providers’ websites crashing – as millions tried to submit meter readings online to avoid paying April prices for gas and electricity used in March.

In May, Ofgem announced plans to allow the price cap to change every three months, meaning prices could rise even further in the coming months. 

The announcement was met with fury by financial campaigner Martin Lewis, who accused Ofgem of “selling consumers down the river”.

Rent, bills and mortgages 

Private rental costs are now rising at the fastest rate on record, jumping 14 per cent in London over the past year and more than 19 per cent in hotspots like Manchester, according to data from April.

The average advertised rent outside London is now 10.8 per cent  higher than a year ago as tenants grappled with “the most competitive rental market ever recorded”, property website Rightmove said.

Already, data shows that private rents are unaffordable for the poorest in the country, with data from 2021 showing that there are just two areas in England where the poorest families spend less than 30 per cent of their income on rent costs.

Data also shows that no region in England is affordable for a woman on a median salary to rent a private home.

Housing costs have also been pushed up further for many by an increase in council tax bills, with around two-thirds of councils deciding to raise rates.

In many areas, the increase has been the maximum permitted without consulting residents – 2.99 per cent.

However, if you live in a home rated with a council tax band between A and D, you should be receiving a rebate of £150 from to ease cost of living pressures.

If you pay your council tax by direct debit, this will be paid into your account automatically. Otherwise, you should check with your local council to see how you can access the funds.

Mortgage holders have also been hit by an increase in costs as the Bank of England has increased the base interest rate in an attempt to tackle inflation. This means repayments will be more expensive.

Many mobile phone and broadband providers are also putting up costs, with BT, for example, adding £42 per year onto bills for customers.

You should check with your broadband and mobile providers to see whether any increases are ahead, and consider shopping around for a cheaper deal to reduce costs.

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Groceries 

The rising cost of food has been a primary concern for poverty campaigners, with food banks reporting an increase in demand for their services which could force them to ration how much food goes into a parcel.

According to market analysts Kantar, grocery prices rose at their fastest pace in more than eight years during February, hitting 4.3 per cent.

This represents the steepest rise since September 2013, with the price of fresh beef, cat food and savoury snacks rising the fastest.

With inflation set to hit another record high this spring, and the conflict in Ukraine creating disruption to supply chains, prices are expected to continue rising for some time.  

Taxes 

From April 6 to April 5 2023 national insurance contributions will increase by 10 per cent,  which ministers said will be used to tackle massive backlogs in the NHS and, in the coming years, improve social care services. 

Ministers and much of the media have been describing the increase as 1.25 percentage points — from 12.5 per cent to 13.25 per cent. While this is accurate, it downplays the scale of the increase and differs to how many other changes are being presented. 

National insurance is paid in part by employers, and in part by employees. 

The proposals have been particularly controversial because those over state pension age, who are likely to benefit most in the short-term, do not have to pay it. 

Sunak announced in his Spring Budget, however, that the threshold at which national insurance is paid will be raised by £3,000, from £9,568 a year to £12,570, matching the rate at which income tax must be paid.

Travel 

At the start of March, rail fares rose by 3.8 per cent, heaping further misery on households already facing rising living costs. 

In spite of calls to scrap it, the government defended its decision to go ahead with the rise, saying the hike taking place in March gave commuters ample opportunity to purchase season tickets at old prices.

Labour have criticised the decision, however, saying that commuters will see average fares rise to 48.9% more than they were in 2010. 

Shadow transport secretary Louise Haigh said: “Families already facing soaring taxes and bills will now be clobbered with an eye-watering rise in the cost of the daily commute. Many will wonder what planet ministers are on if they think people can afford this?”

So how much worse-off will I actually be? 

The government has uprated the minimum wage, benefit payments and pension payments as of April.

However, universal credit and pensions have gone up by just 3.1 per cent. With inflation having risen to 9 per cent, the cost of living will still be rising at almost three times the rate of benefits.

While the minimum wage has risen 6.6 per cent, further inflation means gains have also been wiped out here. 

Overall, most households will be facing a decline in their standard of living as wages fail to keep pace with increased costs. 

Although the amount you lose will depend on your personal circumstances, the Resolution Foundation has estimated that typical household income will fall by £1,000 once the impacts of inflation have been accounted for. 

The additional costs will affect poorer households disproportionately due to the fact that they pay a higher percentage of their income on things like energy bills, the Resolution Foundation has said.

“So far, the government’s measures to reduce the impact of these bill rises have been shockingly inadequate,” Luke Murphy, associate director for energy at the Institute for Public Policy Research, said. 

“To prevent this energy crisis becoming a living standards catastrophe, the government needs to get targeted support to those with the greatest need.

“That means uplifting benefits by 8.1 per cent.”

What is the government doing to tackle the problem?

Sunak’s Spring Statement in March outlined a few extra measures to tackle the cost of living crisis. This included:

  • A fuel duty cut by 5p in the pound
  • Extending the household support fund to support vulnerable families
  • Raising the national insurance threshold to same rate as income tax
  • Reducing the basic rate of income tax by 1p in the pound in 2024

Earlier in the year, the government confirmed it would give households in council tax bands A-D a £150 rebate on council tax bills this April.

This will be followed by a £200 “discount” on energy bills in October, but this will function as a loan, with all households repaying it in £40 instalments over five years.

On top of this discount, the government says it will provide discretionary funding of £144m to support vulnerable people and individuals on low incomes that do not pay council tax, or that pay council tax for properties in bands E-H.

The government has been harshly criticised for failing to provide enough support to families on the breadline. Under pressure from these critics, reports suggest that further measures could be announced in the coming weeks.

According to reports in The Times, this could include an expansion of the warm home discount to give three million of England and Wales’ poorest homes £150 off their bills from October, with general tax cuts announced at the same time.

Where can I get help if I’m struggling? 

If you’re struggling with increased costs, there are many different ways you can seek help.

On energy bills, the government has a host of existing schemes you may be eligible for which can help you pay your bills such as the Warm Home Discount and Winter Fuel Payment.

The government is also offering £200 loans for energy bills in October which will be paid back on subsequent bills.

Citizens advice has a comprehensive list of grants and schemes for paying your energy bills on its website.

Water suppliers have schemes available to help customers pay their bills, so if you are struggling in this instance, this should be your first port of call. 

For rent, you may be able to get help through claiming universal credit, which has now replaced housing benefit. 

If you already claim benefits, and they don’t cover your housing costs, you may be able to get a discretionary housing payment through your local authority, which can help to cover the shortfall.

Council tax relief is also available via your local authority if you’re struggling to pay. You can find out more about applying for council tax reduction through the government’s website.

If you pay your bill by direct debit and are in council tax bands A-D, you should get an automatic rebate. If you pay another way, you should check with your local authority to check how you can claim. 

Your local council may also be able to help you if you’re struggling to buy essentials like food – and you don’t necessarily need to be in receipt of benefits to get help.

Alternatively, you could seek help from a food bank if you’re having a hard time paying for meals. The Trussell Trust – the largest UK food bank organisation – has a list of food banks you can access on its website.

Citizens Advice has a comprehensive guide on what to do if you’re struggling with living costs of all kinds, and can be contacted to help signpost you to services which can help.

Martin has also put together a “cost of living survival guide” with dozens of tips on how to save money and survive this difficult time. 

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