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How Can You Navigate The Cost Of Living Crisis?

Over the past few months, it has been impossible to miss that a lot of people’s basic living expenses have dramatically increased, with projections suggesting that without government intervention, these prices are going to increase even further at a rate not seen in decades.

It has been routinely described as a crisis, and MoneySavingExpert’s Martin Lewis has gone as far as to describe the situation as “catastrophic”(1) on multiple occasions.

As of 1st October, the UK Government’s Energy Price Guarantee will take effect, meaning that for the next two years a typical household will pay an average of £2500 per year, higher than the current cap of £1971 per year, but less than the expected £3549 figure without intervention.

With a growing number of people struggling and requiring debt advice to ensure they have enough room to keep going this winter, advice on how to navigate the various different parts of the cost of living crisis can be the difference between getting through and being forced to make very tough decisions.

We hope to explain as best we can the cost of living crisis and what options are available to you, but given the scale of the increases, the reality is that a lot of advice cannot go far enough to help with the scale of an issue that is not their fault, and several money-saving advisors, including Mr Lewis, have actively campaigned the government to intervene.

What Is The Cost Of Living Crisis?

The term “cost of living crisis” is not new, with the idea dating back to the Bread Crisis of 1795(2) and the time in 1800 when inflation reached 36 per cent, the highest figure in the history of the United Kingdom.

A cost of living crisis is when the cost of everyday essentials increases faster than average household income in real terms (3) (ie adjusted for inflation and after taxes). In other words, it means that an average monthly income buys less after taxes, essentials and inflation is accounted for.

There are a lot of causes for this, some of which affect people globally whilst others are specific to the UK.

The global factors include the global health crisis since 2020, a supply chain crisis that has particularly affected electronic chips and Russia’s invasion of Ukraine, which has led to sanctions that have affected many if not most of the world’s advanced economies.

However, the most acute effects have been caused by issues unique to the UK, such as tax increases, increases to National Insurance and, most prominent, the substantial increase to the energy price cap which has had a knock-on effect on the rest of the energy market.

As well as this, inflation has surpassed ten per cent for the first time in 40 years, and the Bank Rate increases the Bank of England has used to manage inflation has led to increase loan and mortgage repayments.

This, combined with a general stagnation in wages and benefits, has caused wages to fall in real terms by the highest rate (4.5 per cent) since records began.

All of this is to say that the cost of living crisis has a huge number of causes, almost none of which are the fault of the people facing the consequences.

What Options Are Available To You?

Whilst it is important to know the causes, this still leaves the question of what people can do about their situation.

There is a wealth of effective advice about how to budget, manage money and make the most out of every penny as well as opportunities to get savings, freebies and even be paid for doing very little.

These small changes (4) can accumulate and lead to substantial savings and in cases where someone has dipped into debt or has started to struggle as the result of cost of living increases, this can be enough to take them out of the red.

However, there are a growing number of people for which small savings, budget tips and cutting back on treats is not going to be enough to help manage overwhelming debt, or for whom there is simply nothing more that can be saved or extra money earned.

It is in these circumstances that we offer a range of tips that could help in particular, desperate situations, but as with any advice about debt, talk to someone if you are particularly concerned or confused.

Focus On Priority Debts

There are many different types of debt that people get into, and whilst all debts should be paid off as soon as you are able, if you cannot pay at least the minimum payments on all of them, make sure to at least pay off priority debts or set up payment plans with whoever is owed them.

Priority debts are debts where there is an active and immediate consequence for not paying them beyond harm to your credit rating, such as having essential services cut off, leaving you homeless or where a creditor can enforce the debt with additional powers such as taking money from your account.

These can include:

  • Council Tax
  • Mortgage Repayments
  • Rent
  • Gas & Electricity Bills
  • Child Maintenance
  • Magistrates Court Fines
  • Country Court Judgements
  • Hire Purchases
  • Phone Bills
  • Secured Loans
  • TV License
  • National Insurance, VAT and other Tax

If you have laid out your current debts and are struggling to make all of them after making a budget and seeing how far it can stretch, contact your creditors to explain the situation.

Whilst most of the financial measures brought in to help people in 2020 have been phased out, some creditors will still offer flexibility, given that a debt paid off slower is far more desirable than a default.

Claim What You Are Entitled To

According to StepChange(5) over £10bn of benefits, people are entitled to are not claimed for, and it is essential to get all of the income you are entitled to, as this can help to make a significant difference in the short and medium term.

Don’t Not Pay

The sheer shock increase in bills has led to some calls to simply not pay the increased energy bills in a similar move to the mass non-payment campaign against the Poll Tax in 1990,(6) which led to the tax’s quick demise.

However, this is not the same situation and as illustrated above, energy providers have ways to take action against people who do not pay, even in significant numbers, such as disconnections and damaging credit scores which can have years-long repercussions.

If you are struggling with debt as a result of the cost of living challenges you can contact the Fresh Start UK team today.






Money Helper has replaced the Money Advice Service and brings together the support and services of three government-backed financial guidance providers: the Money Advice Service, the Pensions Advisory Service and Pension Wise.