It has been a long time since there has been much good news on the economic front, with inflation rising, energy prices set to soar when the Price Cap is reset in October, interest rate rises squeezing mortgage holders and the Bank of England predicting a recession.
Even the jobs market, where unemployment is presently at its lowest since 1974, is expected to deteriorate in the coming months.
For that reason, there will be at least a little cheer arising from the latest official data from the Office for National Statistics revealing that the Consumer Price Index rate of inflation has fallen from last month’s 10.1 per cent level to 9.9 per cent.
The main cause of the fall has been a drop in motor fuels, which has at least brought some relief at the petrol pumps, even if domestic energy and food costs have soared.
Even so, the fact remains that for many inflation remains high, pay increases trail well behind prices and for those who also have mortgages to pay, the increases in the base rate over recent months that have taken it to 1.75 per cent – historically low but still the highest since 2009 – may not be over.
The Bank of England’s Monetary Policy Committee(3) will decide if another rate rise is required on September 22nd, having delayed the latest decision in deference to the passing of the Queen.
Whether they have a mortgages or not, many consumers may find they are now struggling to pay off what they owe on their loans, cards and other borrowing while meeting rising bills elsewhere, which is why finding debt solutions may be essential.
The other element of what may be considered good news to a small extent was the announcement by the government of a £150 billion package to enable the typical household to pay no more than £2,500 a year on their energy bills.
While this is good news compared with the prospective Energy Price Cap from October of £3,549 (4), it is still £529 more than the £1,931 on the current cap, which in turn rose from £1,277 earlier this year (5). In effect, the cost of heating a home will have doubled.
There may be other policy changes along the way including reforms of the energy market, more sourcing of gas from UK sources such as the North Sea and fracking – though the latter may face opposition from activists on the ground – and new nuclear and green energy, but these will take time to come through, in some cases years. Energy could be expensive for a long time.
All this means that while the dip in inflation and the steps taken to limit energy price rises may help ease inflation, the strains built up over the months before will have already paced many in a very tough position and this will only get harder before the cost of living finally drops back to more ‘normal’ levels.
It should not be forgotten that for those who have not had significant increases in income, lower inflation next year only means not adding more problems in top of the ones they already have and can still leave people worse off overall in the longer run.
If you are struggling with debt as a result of the cost of living challenges you can contact our UK debt advice today.
References
(1)https://www.bankofengland.co.uk/monetary-policy-report/2022/august-2022
(2)https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/august2022
(3)https://www.bankofengland.co.uk/news/2022/september/mpc-announcement-postponed
(4) https://www.ofgem.gov.uk/publications/ofgem-updates-price-cap-level-and-tightens-rules-suppliers
(5) https://www.ofgem.gov.uk/publications/price-cap-increase-ps693-april
