As inflation soars and wages stagnate, the poorest face increasing financial strain and limited government support

For many families, the looming cost of Christmas is adding to an already challenging financial situation, with inflation at a decade-high and consumer goods prices climbing rapidly. For those already struggling, providing a festive meal is a significant challenge, and the emotional burden is just as heavy as the financial strain. What was once a yearly concern is now compounded by rising everyday living costs, with further hikes expected in the coming year, especially affecting the lowest earners.

In April 2022, a planned rise in national insurance is expected to hit low-income earners hardest, as a 1.25 percentage point increase will disproportionately affect those on lower hourly wages or part-time jobs, while those with higher incomes will barely notice the change. This move follows the controversial decision to end the £20-a-week increase in universal credit benefits, which had been providing vital support to low-paid workers. The government’s actions have drawn criticism from across political lines, including from members of their own party, who argue that these measures undermine the so-called “levelling up” agenda.

Energy costs are set to soar in the coming year, with average bills expected to reach £2,000 annually, a significant portion of which will be borne by those on minimum wage. This rise comes alongside increasing fuel costs, which are especially burdensome for low-income workers who rely on transportation to access employment.

Housing costs are also rising, particularly for social housing tenants. Around 4.75 million families in England could face a 4% rent increase next year, adding an additional £202 to their annual expenses. As inflation peaks in April, these increases are likely to exacerbate financial pressures on already struggling households. The situation is made worse by the fact that many low-paid workers, including those in retail, care, and hospitality, have borne the brunt of the pandemic and now face even more uncertainty.

The financial strain of the past two years has only widened the gap between the wealthiest and the poorest, with homeowners benefiting from reduced housing costs while the poorest face escalating rents. Social housing tenants now spend nearly 20% of their income on housing costs, while homeowners, who typically earn higher incomes, spend only about 9%. The ever-growing disparity between these groups has made the divide between the wealthiest and the poorest even more pronounced.

The question remains: why aren’t social landlords taking action to prevent rent increases? Housing associations, while operating with a social mandate, are primarily commercial entities focused on their bottom lines, making it difficult for them to prioritise the needs of their tenants. The government’s failure to act, compounded by a series of poor political decisions, including Brexit, has left families caught in a cycle of inflation, restrictions, and rising costs.

To alleviate some of this pressure, the government could reconsider its national insurance increase or intervene in rising energy prices. However, given the government’s lack of compassion and its failure to address the ongoing cost of living crisis, many are left wondering whether this will lead to more long-term damage to the country’s most vulnerable.