The fun things go first, explained Michelle Nicholls, a self-employed cleaner in the English town of Harlow in Essex, just north east of London, who earns £8,000 a year.
Since food costs hit the escalator and petrol prices spiked, the 47-year-old and her partner, who works as a delivery driver earning £25,000 before tax, have had to cut back on weekend trips to see friends and family as well as occasional nights out.
It will be her dance classes, and excursions for her 13-year-old son that go next, said Nicholls. In recent weeks the cost of her basic weekly shop has climbed from £80 to £119.
When the energy bill doubles next month and national insurance contributions go up, she is not sure how the family will cope. “There’s not a lot left to go out and have fun. That’s already squeezed,” she said.
With the economic shocks from the war in Ukraine further fuelling inflation, Rishi Sunak, the chancellor, is under mounting pressure to find ways of alleviating the worsening cost of living crisis when he delivers his Spring Statement next week.
Harlow, where 61 per cent of residents have less than £125 of disposable monthly income, according to the council, has been especially hard it. The town, which is predominately white working class, has been a bellwether parliamentary seat that has been held by the governing party since the 1980s. The incumbent Conservative MP Robert Halfon is a long time campaigner against fuel tax.
For low income earners such as Nicholls, inflation is a cruel postscript to the coronavirus pandemic. It is paring back their existence and causing renewed anxiety just as things had opened up after two years of social isolation.
“I know they don’t have a magic money tree in Downing Street but I hope that they can help us,” said Nicholls.
“People don’t blame the government for these problems, but they will for not doing anything about it,” said Dan Swords, at 21 the youngest councillor in Harlow, who helped the Conservatives win the traditionally Labour council last May by campaigning for a cut to local taxes.
“There are times everyone needs help and this is one of them,” he said, arguing that after all the restrictions imposed during the pandemic there was a greater onus on government to help people bounce back. “Just taking the sting out won’t be enough.”
According to the Resolution Foundation think-tank, the typical family could see disposable income fall by 4 per cent, or £1,000, in real terms in the 12 months to April 2023. The poorest will be hardest hit because they spend a bigger proportion of income on food and energy, where prices are likely to rise most.
Household budgets are feeling the pinch: food inflation is at its highest since 2013 and petrol and diesel prices have hit record levels. But the squeeze is set to worsen dramatically from next month through a combination of tax rises and a jump in the average annual energy bill to almost £2,000, even as wages and benefits lag inflation.
The Bank of England warned on Thursday that the effects of Russia’s invasion of Ukraine could push inflation up to 8 per cent in the spring, adding that monetary policy was powerless to prevent the energy shock weighing on UK income and spending.
The Institute for Fiscal Studies has calculated that Sunak would need to spend an extra £12bn if he wanted to provide the same degree of protection against rising prices as he intended when he unveiled a £9bn package to help households with rising energy bills in February.
The Citizens Advice bureau in Harlow has seen the number of people needing help with energy debts increase by 127 per cent since last year. There has also been a steady rise in pupils qualifying for free school meals, according to Laura Ciftci, headteacher at the Jerounds Primary Academy.
Halfon has called on the government to cut fuel taxes and ease the green levy on energy bills to mitigate the pain. He has a track record for similar successful campaigns in the past, and was dubbed “the most expensive MP in parliament” by David Cameron when he was prime minister.
“It is the people who were just about managing that are finding it hardest. These are not people at home sitting on the couch all day. They are working,” he said, arguing the Treasury should use a VAT windfall of £3bn from rising fuel prices.
Steve LeMay, the retired owner of a big family business in the town, echoed Halfon, calling on the government to cap duties on petrol. “There will be people thinking if it goes up to £2 a litre they won’t be able to use their cars.”
At the Jerounds Academy school, Siobhan Dean, a learning support assistant on a net salary of £1,000 a month, has already decided to stop using her car. Her husband, who works in building maintenance, volunteered for a 20 per cent pay cut during the pandemic, and the family, with three children, was struggling.
The government, she argued, should be forcing energy and oil companies to save some profits in buffer accounts when times are good, to use to maintain consumer prices at sustainable levels at moments like this.
“There will be a point when people like me have to start selling things,” she said, adding: “We are seeing families who have to choose whether to heat their homes or feed their children.”
Meanwhile, inflation is undermining the economic rationale of some jobs. Cab drivers at Harlow train station were in despair. Martin Davies, who has been driving a taxi for 15 years said that with diesel prices at £1.79 a litre, he needed to make £550 a week to break even after paying the minicab agency and rent on his car. Yet his clients were squeezed and using taxis less.
“It’s getting a bit like during Covid. Although you are earning more now, the costs are taking all your profits.”
Source: Financial Times