Cost of living crisis brings misery for millions

A worldwide concern, but how did it become so severe so quickly?

The approach of summer might, for the time being at least, alleviate the “heat or eat” anguish for numerous householders. But multiple stories of parents surviving on their children’s leftovers while charities, food banks and citizens’ advice centres report a massive increase in desperate requests for help, prove that the cost of living crisis is blighting millions across the UK. The situation is as bad as it’s ever been in modern times and is predicted to get worse. Food and drink price inflation figures are at their highest for more than a decade and experts fear the rate will top 7% in the coming months, with some saying it could reach a staggering 12% over the summer. In practical terms this means the cost of milk alone could rise by 30%.

Staples like eggs have risen in price by 5.5%, with further increases predicted, while the knife-edge situation in the pig farming industry means the cost of sausages has risen by up to 13% over the past year and bacon by over 20%. And these are not isolated items, the weekly food and domestic goods bill is rocketing, with no sign of slowing down. Then there’s energy. Household gas and electricity bills are at least doubling, and in some cases tripling, meaning the increase alone will exceed four figures. And is the government helping those unable to pay? To date, not much. Despite the four major energy suppliers calling for further, urgent aid for consumers, government strategy so far is to credit every electricity bill with £200 in October. The cash is described as an “energy rebate” to help particularly the most vulnerable. But no matter how ministers spin it, the paltry pay-out is no genuine “rebate” as even those most in need will have to repay the full amount through future bills.

The cost-of-living crisis is undoubtedly a worldwide concern, but how did it become so severe so quickly here in the UK? Farmers and others in the food industry battling to stay in business reckon a “perfect storm” of Covid, Brexit and the war in Ukraine have combined to wreak havoc. Covid, with its lockdowns and shutdowns, was disastrous for the economy, and with Brexit caused the labour shortage which has never been rectified. And though the government, like the BBC, has mainly stopped mentioning Brexit, the detrimental changes it brought to border controls and trade with the EU community are undeniable.

There are no lorries queuing for miles on the other side of the channel, and no apparently unresolvable issues with imports and exports between the remaining countries of the EU. With supplies of gas and oil from Russia halted following its onslaught on Ukraine, prices have soared, and the issue of precisely where these currently essential commodities will come from in the future is taking centre stage. Alternative energy sources, once common in this government’s rhetoric, appear largely to have been put on the back burner with government policy focused mainly on surviving the here and now. And surviving the here and now is increasingly in the minds of millions across the UK, as prices surge and concerns multiply daily.

Has the sun set on Sunak’s dreams?

Not long ago he was the Conservatives’ golden boy, a future prime minister, perhaps the next prime minister. But then swiftly it all changed, leaving Chancellor Rishi Sunak struggling to hold on to his current job, let alone think about the next. A fine, after police investigations found he was at a Downing Street lockdown party, damaging revelations regarding his personal and family tax affairs, and an apparently scant understanding of how his decisions are affecting the poorest in the community, have seen Sunak’s stock tumble.

The chancellor is a multi-millionaire, one of the richest men at Westminster. He is married to Akshata Murty, who is worth around £690m in her own right and is the daughter of a billionaire. Sunak knows all about money but it appears he knows little about those most in need of it.

Since his unpopular Spring Statement which gave minimal help to the poorest families, he has made a series of cringingly unwise moves and comments in a bid to recover his dwindling popularity. In an LBC phone-in he could almost be heard squirming as he listened to a single mother saying she was unable to keep her heating radiators on and was worried for her children. A BBC interview saw him respond to a question about the price of bread with the words, “We have all different breads in our house.” And an ill-advised photo opportunity at a Sainsbury’s petrol station saw him borrow a staff member’s Kia Rio to fill up at the pumps and then struggle to pay for it at the till with his contactless card. So instead of coming over, as planned, as a man of the people, he looked like a privileged fish out of water, hugely distanced from the real world and the realities of day-to-day life.

The cost-of-living crisis is biting hard. Millions are suffering unprecedented hardships and Sunak is the person in government whose decisions could most aid those desperately in need. He is perfectly entitled of course to do whatever he wishes with his own money. But in the current economic climate, a recent £100,000 donation to the ultra-posh Winchester College where he was once head boy will not chime with millions of voters. Similarly, the revelation that Ms Murty had saved millions in tax on her overseas earnings thanks to her non-dom status does not look good on the government’s Chancellor of the Exchequer.

Ms Murty has now said she will in future pay UK tax on all her earnings, but that smacks very much of a gesture that’s too little too late. Since then, Sunak has posted a tweet addressing the “cost of living challenges faced by people in the UK”, adding that together with the Prime Minister he will “get on with the job and focus on the people’s priorities”. Some might say that it’s about time he did precisely that.

Above: Contributions to the 12-month CPIH (Consumer Prices Index and Housing costs) March 2020 to March 2022, contributors, percentage point contribution. Source: ONS.

Is “green” really a cash machine?

Despite oil giants BP and Shell reporting decade-high profits of £10bn or more, with one executive saying, “It’s possible that we’re getting more cash than we know what to do with,’’ Chancellor Rishi Sunak steadfastly refuses to impose a one-off windfall tax on the companies. Sunak maintains that “it would be silly to help families with the cost-of-living crisis now”, and that the government must wait and see what the situation is in the autumn.

There are currently no promises for then either. And with households reeling under the combined effect of energy prices more than doubling and record-high inflation, one Whitehall source was quoted in the Independent newspaper as saying that the Treasury has withheld financial support in the belief that people will be able to use their savings to weather the storm. As our surveys testify, millions across the country will be asking, “What savings?” This comes after Sunak was widely criticised for largely avoiding the needs of the poorest in his mini-Budget in March. BP’s chief financial officer Murray Auchincloss made the “more cash than we know what to do with” boast when speaking to investors.

At the same time senior managers in the fossil fuel industry continue to seek to justify their financial bonanza on the grounds that billions are needed to transition to low carbon companies. Unsurprisingly, they too are against any windfall tax. But the facts do not support claims that record levels of oil money are being poured into green projects and the race to net-zero greenhouse gas emissions.

BP plans to invest around £2bn-£3bn in renewable energy by 2025, but its overall capital investment will be £60bn, most of which is likely to go into new production that will raise greenhouse gas emissions. And their “green” spending will probably also include projects such as “blue hydrogen” derived from fossil fuels. Critics say this produces substantially higher carbon emissions than natural gas. Similarly, Shell’s proposed near-term investment in low-carbon activities is considerably lower than its spending on fossil fuel production.

Richard Black, a senior associate at the Energy and Climate Intelligence Unit thinktank is sceptical over the major oil and gas producers’ argument that higher profits are needed to invest in green projects. He said in an interview, “Past experience suggests that the oil and gas industry is strong on rhetoric when it comes to cleaning up their act, but investment is still inadequate.” So where does this leave consumers, particularly those struggling most to make ends meet? Opposition parties are loud in their calls for the windfall tax, some claiming that it could mean up to £600 towards rocketing energy costs for each household. But that bonus doesn’t look to be coming any time soon. As for the future, swift and totally committed progress into providing alternative, sustainable and affordable energy still appears some way off. And for now, it seems that while words can come cheaply, energy can’t.

Surveys

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