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ReWAGE's new policy brief finds that the current cost-of-living crisis is 鈥榰nprecedented鈥� with a combination of high inflation, low wages and a drop in benefits that hasn鈥檛 been seen before.

The report examines the causes and impacts of the cost-of-living crisis, and proposes eight actions that would help to alleviate its devastating effects – potentially assisting millions of households who have seen their 鈥榬eal鈥� disposable income fall sharply since late 2021.

The facts:

• More households than ever in the UK are in serious financial difficulties - according to Bristol University鈥檚 Coronavirus Financial Impact Tracker, the number has risen from 2.8 million in October 2021 to 4.4 million in June 2022.
• The Food Foundation鈥檚 Food Insecurity tracker, which asks households about consuming less food, skipping meals, and being hungry for affordability reasons, found that in September this year, 26%of households with children had experienced food insecurity in the previous month compared to 11% the year before.
• The Trussell Trust reports that it provided over 2.1 million food parcels in the year to March 2022. This is an increase of 81% on five years earlier and an increase of 14% on two years earlier. The only period in which more food parcels were provided was in 2020/21 – the first year of the pandemic.

Professor Ashwin Kumar, author of the report and Professor of Social Policy and Director of the Policy Evaluation Research Unit at Manchester Metropolitan University, says:

鈥淭he current cost of living crisis in the UK is unprecedented. In September 2022 annual inflation, as measured by the Consumer Prices Index, was higher than at any point since the early 1980s. The only times that inflation has been higher were during the Second World War, in the mid-Seventies and from 1979-81.

鈥淲hat is striking about this period is how wages have failed to keep up with prices. Wage growth in the year to August 2022 was 3.6% lower than the Consumer Prices Index price growth and since the 1960s the current real-term decline in wages was only exceeded in 1977.

鈥淲e have also seen a drop in the real value of benefits like never before. The April 2022 uprating of benefits saw a 5.4% fall in their value relative to prices – the largest fall since records began.

鈥淎ll of these factors combined have put millions of households under huge financial pressure.鈥�

So, what can be done to help those households who are in serious financial difficulty? Here are ReWAGE鈥檚 eight recommendations:

1) More timely uprating of benefits - reduce the time lag between the measurement of inflation and the uprating of benefits.

2) Uprating of the Benefit Cap - increase the Benefit Cap to take into account inflation.

3) Provide support through the benefit system - instead of paying flat-rate amounts, provide additional support through standard allowances in means-tested benefits.

4) Additional public sector wage increases for the lowest paid - increase the wages of the lowest-earning public sector workers by more than nationally-set pay norms.

5) Consider higher increases in the minimum wage - increase the Minimum Wage beyond the level implied by median earnings growth.

6) Review support through the benefit system for low-income owner-occupiers with mortgages - ensure that the system of support for low-income owner-occupiers is able to increase support to households if mortgage rates increase sharply.

7) Better measurement of inflation experienced by the poorest households - commission research into the reality of inflation experienced by low-income households.

8) Reduce trade barriers with major trading partners – work with the European Union to minimise non-tariff barriers to trade.

Professor Kumar continued:

鈥淢any of these actions are straightforward, potentially quick to implement and would have little impact on the overall rate of inflation. They are what is needed right now to help the millions of families across the UK who are struggling with their finances and having to make some very difficult choices.鈥�