From Liverpool to London, Inflation Means Tighter Wallets and Colder Homes

LIVERPOOL, England – For the past few weeks, Vincent Snowball has had no need to use the weekly food bank which is in a church near Liverpool city centre. But he’s still there every Tuesday, spreading out fabric swatches to advertise his upholstery services and socialize with the people he grew up with.

Like many people across Britain, Mr Snowball, 61, has been forced to cut his already modest spending to stabilize his finances. Prices are rising at their fastest pace in three decades.

“I go to Tesco and get a shock,” he said, referring to Britain’s ubiquitous supermarket chain. The prices there are “troubling”, he said. Instead, he shops at Aldi, the rapidly growing chain that claims to be Britain’s cheapest supermarket.

Prices are rising sharply in the United States and across Europe, due to rising energy costs and supply chain issues triggered by the relaxation of pandemic rules. But in Britain there are fears that soaring heating and electricity bills, combined with food inflation, could push millions more into poverty.

The Bank of England raised interest rates on Thursday for the second time in two months, ahead of the Federal Reserve or the European Central Bank. But policymakers recognize there is little they can do about the global factors driving inflation.

Across the country, people are turning down or turning off their heating, opting for cheaper supermarkets, taking fewer car trips, cutting take-out and restaurant meals and abandoning vacation plans.

Thursday brought more painful news when the government’s price cap on energy bills was raised by 54%, or around 700 pounds ($953) a year, reflecting high global natural gas prices. The increase will affect 22 million households from April. That same month, a big increase in National Insurance, a payroll tax that funds the National Health Service, among others, will also come into effect, further reducing take-home pay.

Although inflation is expected to peak in April at 7.25%, Bank of England economists believe that household finances will continue to erode: for the next two years, household incomes after inflation and taxes will be lower than the previous year, the bank said. This will be the third period in about a decade that real wages have fallen in Britain.

This period is “somewhat unprecedented because it comes in the wake of a very huge Covid shock” and Brexit, said Arnab Bhattacharjee, professor of economics at Heriot-Watt University in Edinburgh and researcher at the National Institute. of British Economic and Social Research.

Mr Snowball’s gas bill has risen, after a spike in natural gas prices in Europe late last year, so he uses it mainly for hot water. Although he lives in the North West of England, he rarely turns on the heating. “I’m very aware of what I use,” he said.

But there are limits to what Mr. Snowball can handle. He receives around £300 ($403) in state support for his £550 monthly rent and an additional £213 a month in in-work tax credits, financial support for people on low incomes. There is no luxury to be cut.

“There are millions of people like that,” Mr. Snowball said.

Although the UK economy has slowly shaken off much of the sluggishness of the deep recession caused by the coronavirus, millions of people are not benefiting from the recovery. Since the start of the pandemic, the number of people receiving Universal Credit, the main government income benefit, has doubled to six million. Since peaking nearly 11 months ago, it has only fallen to 5.8 million. The number of people using food banks has also jumped, according to the Trussell Trust, a nonprofit that provides emergency food parcels, and independent groups.

A cost-of-living crisis was predicted last fall, but “what surprised this time around was the degree of inflation in food prices,” Bhattacharjee said. “That hasn’t happened in the last decade.” In December alone, food and non-alcoholic beverage prices rose 1.3%, the fastest monthly pace since 2011.

For more and more people, it is impossible to ignore it. Katie Jones’ main food shopping trip, which she takes twice a month, cost up to £80; now it’s more likely to be £100. Ms Jones, 33, works full-time in Liverpool city center at a branch of a national chain of cafes. She lives across the River Mersey with her partner and their three children where, in December, energy bills fell from £95 a month to £140.

“We don’t have take-out food at home anymore,” she said. “It was partly for health reasons, but I also noticed how much it costs.” And there are fewer dates with her partner because she can’t afford the cost.

Food inflation hurts those who try to help. Officials at Earlsfield Foodbank in south-west London recently decided to cut items from their offer – including juices, snacks, cheese and peanut butter – because they are now too expensive. And they will provide fewer toiletries and household items, such as laundry detergent.

Each week, the food bank purchases a wide variety of fresh vegetables and fruits, as well as other foods, to supplement its donations. Over the past few weeks, the cost of supplies has increased alarmingly.

“This number is growing and not really sustainable throughout the year,” said Charlotte White, the manager.

As the cost of shopping increases, so does the list of people seeking help. Last week eight more people registered with Earlsfield Foodbank and 71 people received food parcels. In March 2020, they averaged 25 guests per week, with fewer families and workers.

“Families are already at breaking point, if not beyond,” said Ruth Patrick of the University of York and lead scholar of Covid Realities, a national project in which around 150 low-income parents and carers have documented their experiences through the pandemic. “We’re getting a really mainstream message about fear and anxiety and worrying about how people will cope.”

Through the project, Joanne Barker-Marsh, 49, found emotional and sometimes financial support. She lives in a two-bedroom house on the outskirts of Manchester with her 12-year-old son, Harry, and worries it will be too cold with its high ceilings and uncarpeted floors.

“Probably, I was pretty comfortable last year,” she said. “Now there is no buffer, there is nothing. Around October of last year, that was the first time I was like, ‘Oh my God, it actually doesn’t look that good, I can’t go anywhere.’

That month, the government’s £20-a-week increase for recipients of Universal Credit ended, a pandemic-era benefit she had been receiving since losing her part-time cleaning job in 2020. Recently his British Gas bills have risen by around £20 a month to £90. She had previously taken a payment holiday on her mortgage, she said.

Despite struggling financially for years, Ms Barker-Marsh said she now had to consider even more drastic changes. Namely, selling your house. “I just don’t have a choice,” she said. She is looking to move into something even smaller and easier to heat. “The only asset I have in the world is this house.”

With food prices rising and gasoline prices recently hitting an all-time high, energy bills are the biggest concern for many people.

And the problem will get worse in April when the price cap rises, even as the government tries to soften the blow. The Treasury has said it will give households up to £350 off their bills this year in the form of loans and tax refunds, which is around half of the price cap increase.

A few weeks ago, Thomas Tonchev-Williams, a 33-year-old graduate student, had an unpleasant surprise. Every month he pays a flat rate of £33.80 for gas, an estimated average for heating his one-bedroom flat in central London over the course of a year. It is part of an old house with high ceilings, no insulation, and only half of the rooms have double-glazed windows. The first two bills showed he was using around £16 less gas than he was paying. The next bill said it was over £130. These higher charges and future charges will increase his monthly rate or leave him indebted to his provider.

“Even though I’m spending less time at home than at the height of Covid, my energy bills have never been higher,” Mr Tonchev-Williams said.

Now he strictly limits the heat to one o’clock in the morning and four o’clock in the early evening. Rather than bring it up later that night, he put a second duvet on the bed.

Some people don’t know how to reduce further. At Liverpool Church, Christine Owens, 61, has already switched energy suppliers to access a government-funded reduction scheme. But a few weeks ago the new supplier, EDF, started sending her letters saying her bi-monthly £35 lump sum payment did not sufficiently cover her fuel consumption – she owes £1,000.

“It’s a struggle to do more,” Ms Owens said of her payments.