The latest report by the Office for National Statistics shows that food prices & inflation rates have risen sharply in the UK since Covid-19 restrictions were implemented and a significant percentage of people are struggling with serious financial problems.
Inflation on the Road
The latest report by the Office for National Statistics (ONS), released on Wednesday 15 September 2021, shows that inflation rates in this country reached their highest level in the last nine years last August. The ONS said the Consumer Price Index (CPI) rose to 3.2% in August, showing an increase of 1.2% compared with the previous month. This is the largest increase in inflation rates since 2012.
Food, fuel and second-hand cars have been cited as factors for rising prices and increasing inflation. The price of used cars has increased by 18% in four months. In the past, price always dropped due to the arrival of new cars in late summer. The coronavirus crisis and a drop in car production are said to have led people to buy second-hand cars.
Fuel prices also rose sharply last August, according to the report. The average price rise for petrol was 134.6% a litre, which shows an increase of 21.5 pence as compared to August last year. The Bank of England had forecasted an inflation rate of 2% for this year. But this is the fourth consecutive month this year that inflation has exceeded the central bank’s forecast.
The economic situation in Britain due to the Covid-19 crisis and London’s withdrawal from the European Union is catastrophic. Although all European countries are going through an economic crisis caused by the pandemic, statistics and surveys show that the UK is in the worst position in every respect as compared to other OECD countries.
In HM Treasury Budget 2021, the British government claims that “Throughout the pandemic of Covid-19 the government has acted to protect health, jobs, livelihoods and businesses, and to strengthen public services across the UK.” However, the facts run counter to this claim. According to Reuters, Britain’s economy lost more momentum this month as businesses grappled again with rising costs, a survey revealed, highlighting the difficult backdrop for Bank of England officials ahead of Thursday’s interest rate decision. Moreover, Reuters maintains that, according to the PMI data company IHS Markit, the figures suggested Britain may be on course for a bout of stagflation – a mixture of poor growth and high inflation associated with the economic malaise of the 1970s.
Increase in Energy Bills
High prices of natural gas and low wind speeds in the UK have pushed up electricity prices sharply in Britain. Natural gas still accounts for 30% of Britain’s electricity generation, and electricity prices have been rising in recent weeks as gas prices have risen. In addition, low wind speeds have reduced the efficiency of wind power generation in Britain and hampered electricity supply. Following the recent rise in natural gas prices and hot air, England has set up an old coal-fired power plant. Britain had promised to shut down coal-fired power plants by October 2024. Rising energy prices have caused inflation and the rise of commodity prices for British citizens.
As stated in the Financial Times, experts warn of steep rises in British household energy bills. British household energy bills would need to rise by more than £550 a year if the price of gas stays at its current level and the government does not make an intervention, industry experts have warned. Consumers are already facing an increase of £139 to their energy bills in October as a result of Ofgem’s August announcement that the cap would be lifted as gas prices started to soar. The EnAppSys figures suggested there could be higher energy bills for all households for some time even if prices cool off next year. The alternative would be to cover the costs out of general taxation and borrowing, but the Treasury is said to be worried about the expenditure.
Twenty-Pound Decrease is Universal Credit
At the Trussell Trust, universal credit is defined as “a social security payment”. It supports people with low income and those who are out of work. The payment aims to help with people’s living costs and to ensure that everyone can cover everyday essentials. As explained in turn2us, universal credit replaces six existing benefits: Income Support, Income-based Jobseeker’s Allowance (JSA), Income-related Employment and Support Allowance (ESA), Housing Benefit, Child Tax Credit, and Working Tax Credit. These six benefits are also referred to as legacy benefits.
According to Citizens Advice, the government is to reduce benefits by £20 a week – £1,040 a year – from 6 October. The exact time people will see the cut will depend on the day they get their universal credit payment. This means September will be the last month many people see their benefits paid at current levels. Monthly standard allowances will drop as follows:
- By a quarter for single claimants under 25, from £344 to £257.33
- By a fifth for single claimants over 25, from £411.51 to £324.84
- By 17% for joint claimants under 25, from £490.60 to £403.93
- By 14% for joint claimants over 25, from £596.58 to £509.91
An analysis conducted by Citizens Advice indicates that £20 a week is equivalent to energy costs of six days or food costs of three days for a family with low income. This cut will be a devastating blow for millions of households who are already struggling to make ends meet.
Working Classes at Risk of Poverty
According to The Guardian, the £20-a-week reduction in universal credit will come as a significant financial shock for many people, and it will hit households as furlough ends and large increases in energy prices come into effect.
According to Save the Children, over three million children in households with low-income are likely to be affected by the cut in universal credit, with half of claimants saying they will struggle financially from October. The Joseph Rowntree Foundation has stated that the cut would push 500,000 people below the poverty line. Citizens Advice has also stressed people’s low awareness of the cut, with frontline advisers reporting “major concerns” and high levels of anxiety among clients over how they can live without the extra £20 a week. The British Government has to find ways to save the people from poverty and bankruptcy.