Is the cost-of-living crisis over?
Commentary | 20/02/24
Over the last few weeks, we have seen a lot of news pieces and data released about the country’s financial health and the associated impact on households.
Inflation, recession, borrowing, spending, they have all been mentioned. Another phrase we have heard a lot in recent times is the ‘cost-of-living crisis’.
We have been told we are in a cost-of-living crisis. A global pandemic that changed the employment status of many and war in Ukraine, causing energy prices to go sky high, resulted in many people struggling to manage their finances.
To ease the burden, the Government offered support with the cost of energy, and others also qualified for separate cost-of-living payments to get through a hard winter. It’s unlikely the Government would have provided this level of support if it didn’t expect people to hit crisis point.
Last week the final cost-of-living payment was paid to millions. The Prime Minister used it as an opportunity to say that the pressures were starting to ease, due to falling inflation and tax cuts.
No further payments of this kind have been scheduled. Inflation might be starting to come down but it stalled at 4% in the most recent figures. It doesn’t yet feel like the economy is improving at any great scale.
Last week it was also reported that the country just dipped into recession in 2023, blamed on people spending less – though apparently the figures suggest it won’t last for long, it does appear that there is very low growth. There was some good news however, as food prices have started to fall.
Where does this leave family finances? There are some green shoots of good news like wages starting to rise, but at the same time debt advice providers are reporting high numbers of individuals that use their services are really struggling.
New research published by Citizens Advice claims that politicians are burying their heads in the sand as five million people now find themselves in a negative budget situation. A significant proportion of society still doesn’t have enough money to make it through the month.
It feels like there are now conflicting views on whether the worst is over for many, or that there is still more pain to come as individuals move off fixed rate mortgage deals and expected rises in council tax. Interest rates remain high in the hope that inflation will drop.
It’s no surprise politically that the Government is telling us that things are getting better. It will be interesting to see what the Spring Budget entails early next month especially as election looms in the not-too-distant future.
The Covid-19 pandemic and the introduction of the FCA’s Consumer Duty have shown that the regulator expects firms to really understand the financial position of their customers. At time when some families are struggling more than others, it demonstrates, more than ever, the need for an individual approach.
It is fair to say that while things are starting to improve for some, times remain hard for others.