Rising UK cost of living pushes millions to the brink of financial collapse

Nazmin Begum has a problem: she’s having to pay a lot more to keep her two children warm and fed as the UK grapples with its worst cost-of-living crisis in three decades.

“Everything is increasing,” she told CNN Business during a visit to The Boiler House, a red-brick building on an east London housing estate that offers discounts on food, shoes and fuel vouchers.

Begum’s energy bills for her one-bedroom apartment have increased by around £70 ($92) in the last three months, although she’s been using similar amounts of fuel. She works at Tesco, a supermarket chain, where she has seen “every product” go up in price.

“Milk cost 80 cents a pound ($1.05). The smallest went down to £1 ($1.31),” she said. “Bread – the cheapest we used to make at £1 – went down to £1.20 ($1.57).”

Annual consumer price inflation hit 5.5% in January in the UK – the highest level since 1992 – driven by product shortages and a sharp rise in demand as pandemic lockdowns were lifted. Salaries, however, do not keep pace.

Average worker pay suffered the biggest drop in more than seven years in the three months to January, down 1% from the same period last year, once inflation is factored in, the UK’s National Bureau of Statistics said. Kingdom last Tuesday (15).

And the war in Ukraine has pushed energy costs even higher – gasoline and diesel prices have soared to new highs in recent days.

The Boiler House Youth and Community Space started its food pantry during the coronavirus pandemic. Unlike a traditional food bank, guests browse and buy their own items, paying a fee of £6.50 ($8.50) to receive around £35 ($46) worth of food and toiletries.

But the charity’s services have expanded to provide members with shoes and help pay their energy bills, as many struggle with the most severe slump in purchasing power in years.

Davina Mathurin, project manager at The Boiler House, summed up the dilemma many are facing.

“Do you keep the house warm so your kids don’t get sick or do you buy food so they can eat and not be hungry?” she said.

Millions of people’s fuel bills surged in October when Britain’s energy regulator raised the consumer price cap by 12% – the most suppliers can charge per unit of energy – after a global crisis broke out. natural gas supply has pushed wholesale prices to record levels.

On the day CNN Business visited in February, Mathurin began referring some members to charitable-organized fuel voucher programs that offer up to £49 ($64) to help with the bills. Demand was high, she said.

Monique John, another regular visitor to the Boiler House, told CNN Business that it has a smart meter. The device helps her save energy, but her money is nowhere near what it used to be.

“You literally watch the meter go down and down and down and down and down,” she said.

“There is nothing left to give”

The worst is yet to come.

In April, the energy price cap will rise by 54% – its biggest increase on record – burdening 22 million people with an annual bill of approximately £2,000 ($2,618).

Inflation is also expected to peak above 7%, and a new payroll tax to help finance health and social care will take effect.

The higher costs could increase the number of “indigent” families – defined as those unable to pay for basic necessities – by a third to reach 1 million, according to analysis by the National Institute for Economic and Social Research.

Russia’s invasion of Ukraine last month pushed wholesale gas prices even higher as global markets panicked over whether sanctions would affect Russian exports.

Analysts at investment bank Investec said Britons’ annual energy bills after October – the next time the price cap is adjusted – could exceed £3,000 ($3,927) as a result.

“Now there is nothing left to give from people’s budgets. There’s no way the numbers add up now,” Lucy Bannister, political campaigns manager for the Joseph Rowntree Foundation, an anti-poverty charity, told CNN Business.

“Children are too scared to ask for the heating to be turned on,” he added. “They’re really taking on that stress that they’re seeing their parents go through. They feel hungry and do not ask for food.”

The government will try to ease the pain by cutting local taxes and allowing millions of Brits to spread the cost of their energy bills over the next few years.

A government spokesperson told CNN Business it was “providing support worth around £12bn ($16bn) this financial year and next to help families with the cost of living”.

The spokesperson added that the government would raise the minimum wage by more than £1,000 ($1,309) a year and increase a benefit claimed by low-income people by the same amount. Both will start in April.

Critics say the government’s response is inadequate and fails to reach those who need it most.

Ian Allinson, a member of the executive committee of the Manchester Trades Union Council, which organized a protest against the higher costs in February, said the situation was “alarming”. He said the government’s plan to delay energy payments will not help the most vulnerable people.

“We are shocked that the main measure the government has announced to reduce energy bills is that we have to give ourselves a loan,” he told CNN Business.

“Many people are already struggling with debt. The idea that there is more debt imposed instead of any genuine help is simply shocking.”

Angry Brits are taking to the streets. Protesters and the opposition Labor Party have called for an unexpected tax on energy companies like BP and Shell, which made billions of dollars last year.

“It’s just outrageous that the government is choosing not to do something effective to support ordinary people, but it’s happy to leave these mega profits to the companies that are inflicting it on us,” Allinson said.

Paychecks can’t keep up

In a church in north London, piles of groceries are arranged on a grid on the floor of a small side building. Volunteers are packing the donated items into bags before taking them to people’s doors.

Cooking Champions, an organization serving charities and local businesses, started their delivery service in April 2020 after the pandemic.

Annalisa Moseley is one of the first to receive her purchases. The mother of two said that without Cooking Champions, she wouldn’t have food in a few weeks. Thinking about what will happen after April is stressful, she said.

“It’s all on my shoulders to make sure the kids are warm, fed and everything,” Moseley said. “It’s getting me down a little bit, but I just have to keep going. Keep trying.”

Moseley receives Universal Credit – a benefit for unemployed or low-income people. The government increased payments by £20 ($26) a week during the pandemic, but that ended in October 2021. The benefit will increase by 3.1% in April, but that’s less than half the expected inflation rate.

The rise in wages also cannot keep up.

Spring Community Hub, a food and clothing bank 24 kilometers south of London, runs another door-to-door delivery service. Lately, volunteers have been helping an increasing number of younger and wealthier people.

“We are seeing more workers and people especially in these precarious hours,” CEO Felicia Boshorin told CNN Business. “When real money comes in, it’s not enough.”

Parents “Fear” September

September is a big deal for parents concerned about the cost of school uniforms. Shirts, sweaters and jackets emblazoned with school logos – mandatory in the UK – can cost hundreds of pounds for a single child.

One in 10 British families went into debt buying items needed for school, according to a 2020 survey by The Children’s Society, a charity. That number could grow in 2022 – clothing and footwear were the biggest contributors to inflation in the month to January, according to the Office for National Statistics.

Caroline Rice, who lives in Northern Ireland, is “dreading” the new school year. She is a member of Covid Realities, a research project documenting the experiences of low-income families during the pandemic.

“I can’t pay £100 ($131) for oil, so why would I pay £50 ($65), £60 ($79) for a school blazer?” she said.

Back at The Boiler House, parents are showing up with their kids to browse shelves of colorful sneakers, donations provided by the charity Sal’s Shoes. Begum’s daughter runs into a pair of bright pink and white Converse and tries them on.

“With poverty there’s this loss of dignity if you’re just getting handouts,” said CJ Bowry, founder of Sal’s Shoes.

Its three pop-up stores across the country aim to provide “families with a shopping experience,” she said.

“So they can visit these stores and try on shoes and choose shoes and see a selection of shoes – but they don’t have to pay.”

Sal’s Shoes has shipped nearly 3 million pairs to 54 countries in its eight years, although more and more are being shipped closer to home. The charity distributed 48,000 pairs across the UK in 2021, its highest number ever.

Bowry said he gets calls every day from school principals asking for support.

“We have directors who have done chores on the playground and then they call us because they literally noticed kids on the playground with the soles of their shoes bumping,” she said.

“Difficulty is more difficult”

The Bank of England expects inflation to cool after peaking in April, but high prices will remain.

For people who have taken on new debt and delayed their bills, there will be a scarring effect that can last for years.

A survey by the Joseph Rowntree Foundation last year found that 4.4 million low-income families started borrowing, or added to existing debt, during the pandemic. Of that number, more than two-thirds are late on their payments.

Joseph De-Ville, another Covid Realities member, lives in Cornwall with his wife and three children. He went into debt a few years ago to pay for his mother’s funeral and told CNN Business about the constant struggle to support his family.

“These are the parts of life that people aren’t seeing,” he said. “We’re blocking this on credit cards so we can deal with it, and then we’re struggling to pay off debt because of the interest rates — because we’re having to accept credit cards with high interest rates just so we can get off.”

For more than a decade, the real income and standard of living of millions of Britons have fallen. For De-Ville, the rising cost of living is just the latest chapter in a protracted crisis.

“Difficulty is harder,” he said.