During recent months the economic mood has grown more ominous with a much-talked squeeze on household incomes becoming a reality.
With rising interest rates pushing up mortgages, monthly rental charges following suit and energy prices set to rocket over the coming months, UK households are experiencing a once-in-a-generation squeeze.
As a result, a growing number of households are expected to slip into fuel poverty, with the number of people resorting to food banks now at record highs.
What is the cost of living crisis?
The cost of living crisis is not just a media invention.
It refers to the fall in real disposable incomes that the UK has experienced since late 2021.
It is predominantly driven by high inflation outstripping wage and benefit increases. The rises in inflation show no signs of abating for some time. Indeed, the latest Bank of England forecast predicts inflation peaking at 13.1 per cent in the fourth quarter of 2022.
This is at least partly caused by the 54 per cent increase in the energy price cap from April a, and a further 75 per cent increase due in October.
Inflation is not expected to begin falling for the next two years, with the Bank believing inflation will not reach its two per cent target until the third quarter of 2024 at the earliest.
The squeeze on household incomes has become impossible to ignore.
According to data from the ONS, close to nine in 10 adults reported an increase in their cost of living between March and last November. Nearly a quarter said they were finding it tough to pay their usual household bills.
The Office for Budget Responsibility expects household incomes after tax to fall and not recover until the third quarter of 2024 and the Resolution Foundation estimates that an extra 1.3 million people will fall into absolute poverty in 2023, including 500,000 children.
Bridging the gap
While the government has been criticised for moving too slowly to counter the cost of living crisis, many charities, social enterprises and other organisations have been moving to try and tackle problems caused by the crisis head-on.
The Trussell Trust which supports 1,200 food banks across the UK revealed a huge increase in the number of people using its services.
Food banks in the Trussell Trust network provided more than 2.1 million parcels to people facing financial hardship across the country, from April 1 2021 to the end of March this year.
Anecdotally, since then the number of people using food banks has increased further with food bank volunteers reporting new faces, often from households where both adults are in full-time employment.
Young people are likely to be disproportionately impacted by the cost of living crisis. Poverty and homelessness among the 16-25 age group is on the increase, with the broader economic issues likely to exacerbate the problem even further.
Independent Living Programme
Centrepoint, a charity which provides accommodation and support to homeless people aged 16-25 has ambitious plans to help tackle the problem.
Its Independent Living Programme is building 300 rent-capped homes for disadvantaged young people. This will cost each tenant a third of their salary, giving them the chance to be responsible for their own homes.
For young people who have been or who are vulnerable to homelessness, this is a significant step forward, helping to prepare them for a life outside Centrepoint, in a job and home of their own.
The scheme will support at-risk young people in their search for jobs, with skills training, further education, career advice, job applications, CVs and interview tips. They are then matched with businesses that sign up for the Centrepoint Works scheme. Once they are employed, they can then apply for a home via the Independent Living Scheme.
The Centrepoint initiative looks to provide a degree of stability and predictability during uncertain economic times to people who are at the greatest risk of falling into poverty as a result of the prevailing economic headwinds. It could also help businesses solve their recruitment challenges while having a positive impact overall on spiraling wage inflation.
Javad Marandi, co-chair of Centrepoint’s Independent Living Programme hopes that the 300 homes currently being built are just the beginning:
“I am confident that when we can show concrete evidence of how this scheme works, both practically and economically, we will be looking at building 30,000 homes across the country, helping people whatever their stage of life.”
Centrepoint hopes that more companies will help by donating money, property and land as well as providing employment opportunities for young people.