Inflation is at near 30 year high and more pain is round the corner with energy bills sky-rocketing and a tax rise on the way.
Calls are growing for the Government to do more to tackle the cost of living squeeze, including axing April’s planned national insurance increase.
Below, we look at what is driving rocketing inflation, what action is being taken and what can we expect over the next few months?
Why is everything more expensive?
Covid-19 has hit global supply chains with a combination of pent-up demand and delays to shipping as factories across the world face lockdowns and worker absences.
This has led to prices rising, particularly for raw materials.
Food prices have also risen as wages increase, including for HGV drivers due to recent shortages and with thousands of drivers leaving the UK to return to their home countries in the EU.
But the biggest driver of inflation is eye-watering energy tariff rises after wholesale gas prices shot up by about 500% in 2021, as well as record costs at the petrol pumps from hikes in oil prices globally.
Ofgem recently announced it will increase the energy price cap by 54 per cent in April, adding nearly £700 to annual gas and electricity bills, with a further increase expected when it is next reviewed in October.
Will inflation remain high?
Consumer Prices Index (CPI) inflation is currently running at 5.5% as of January, but the Bank of England has warned inflation will rocket to 7.25 per cent in April – the highest level since August 1991.
It is hoped that inflation will start to fall back in the second half of 2022, although it will not be until next year that CPI gets back to the bank’s 2 per cent target.
The jump in the cost of living is putting household budgets under pressure, with some having to choose between heating and eating.
Here are some resources available if you need help.
Citizens Advice is an independent charity offering free, confidential support with legal, consumer, housing, debt and other problems. its site details what help is available and where your nearest bureau is, for face-to-face advice.
Help line: 0800 144 8848 in England / 0800 702 2020 in Wales (open 09.00 – 17.00 Monday-Friday)
The Trussell Trust
The Trussell Trust supports a national network of more than 1,200 food banks, providing emergency food for free to those who need it. You can use it site to locate support wherever you live.
Helpline: 0808 208 2138 (open 09.00 – 17.00 Monday-Friday)
Turn2us is a national charity providing practical support to people who are struggling financially. its site includes a benefits calculator and details of schemes and grants in your area, including for energy and water bills.
Helpline: 0808 802 2000 (open 09.00 – 17.00 Monday-Friday)
What other costs can I expect to increase this year?
The Bank of England has warned that household income, after taking account of inflation, will plunge by 2 per cent in 2022 – the sharpest drop since records began in the late 1940s.
Along with rising energy bills, there is also a one-year 1.25 per cent national insurance rate rise due in April to help pay for social care and NHS funding.
This comes as official figures have revealed that wages are already failing to keep up with rises in the cost of living, increasing by 4.3 per cent in the most recent quarter – far below the rate of inflation.
Food retailers are also starting to pass on higher costs to consumers, with inflation firmly hitting the supermarket shelves.
What is being done to tackle soaring inflation?
The Bank has increased interest rates twice in the past three months to rein in rocketing inflation, with the latest rise to 0.5 per cent earlier this month marking the first back-to-back hike since 2004.
It has also signaled that more rises are on the way and experts believe the base rate could hit 1 per cent in May.
What is the government doing to help?
Chancellor Rishi Sunak has so far resisted calls to scrap the April tax hike.
Instead, earlier this month he announced a support package including a state-funded £200 discount on energy bills in October, which households will eventually have to repay.
The Government is also offering a £150 council tax rebate from April that will benefit 80 per cent of households.
Will this be enough to help offset the cost of living squeeze?
There are concerns that the measures will not be enough to help and Labor is leading demands for more action.
As well as ditching the tax hike, Labor has also called for a windfall tax on oil and gas firms which have benefited from soaring global prices in order to help fund a cut in consumers’ energy bills, but this has been dismissed by the Chancellor.