UK households slipping into poverty
UK households slipping into poverty
The United Kingdom has been warned of a gloomy economic outlook with a recession now a certainty as a consequence of higher energy prices. This is while new figures show around half of British adults are struggling to pay their energy bills, rent, or mortgage payments.

TEHRAN (Iran News) –The United Kingdom has been warned of a gloomy economic outlook with a recession now a certainty as a consequence of higher energy prices. This is while new figures show around half of British adults are struggling to pay their energy bills, rent, or mortgage payments.

In a reflection of how dire the economic situation has become, the Bank of England has once again hiked the base rate of interest by 0.75 percentage points to 3%, warning that a long recession is on the way. The latest hike is the single biggest increase in more than three decades.

At a news conference, the bank’s governor Andrew Bailey warned that “from where we stand now, we think inflation will begin to fall back from the middle of next year, probably quite sharply. To make sure that happens, Bank rate may have to go up further in the coming months.”

The bank also warned that the country faces the risk of a protracted contraction in the coming years, with high inflation and the unemployment rate climbing to 6.5%. That is the highest since the 2008 financial crisis.

The length of the forecasted recession – eight successive quarters in which gross domestic product shrinks – would make this the most protracted since records began.

The unwelcome news and future economic uncertainty have piled further pressure on the weakening British pound, which has again slumped against the dollar.

The economic forecast does not include any of the expected spending cuts and tax rises the Treasury is expected to impose on November 17, which would worsen the outlook.

Households now face higher repayments on their mortgages and bank loans on top of skyrocketing energy prices and the unprecedented rising cost of living crisis. The bank’s decision is the single biggest increase in interest rates since 1989.

Reacting to the bank’s move, economic experts say the higher interest rates will leave the average household £3,000 more to pay over the next year for their mortgage costs, more than outweighing any government help with energy bills.

The recession is mainly because of the finance minister’s decision to cut back on the length of the energy price guarantee (which limits the amount households can be charged per unit), and partly a consequence of the rising cost of borrowing.

While the Bank of England is trying to soften the blow of a recession in the short term, critics say it will backfire with grim consequences in the long term.

New Prime Minister Rishi Sunak has admitted that families and businesses are facing a worrying and difficult period in the country’s history.

The Bank of England is also set to release long-term inflation forecasts, which are expected to show that the cost of living next year will be much higher than its target of 2%.

Official figures released in September showed inflation hit 10.1% – matching a 40-year high seen in July – with much of this increase driven by rising energy and food costs as a result of the global food supply problem. Both a consequence of the Ukraine war.

The statistics reveal that more than a third of people found it difficult to pay their energy bills over the past three months. Yet the UK, like many countries in Europe, appear to have little desire in any peace initiative to end the Ukraine conflict.

Food banks have sounded the alarm with one food charity saying it has launched its first-ever emergency appeal to meet a “devastating rise in need” as it warns of its “hardest winter yet” as people struggle with inflation.

The Trussell Trust said food banks are “struggling” to meet “a tsunami” of demand which was now outstripping donations. It is calling on Downing Street for help.

Through its support of 1,300 food bank centers, the charity has warned it has already used up its reserve stock of food items, which it says normally help maintain supplies over the winter months.

According to the office of national statistics, some food products have increased by more than the 17% since last year. Cooking oil has risen by 65% in price, pasta rose 60% and tea 46%. Over the past year other “budget” food items have also increased.such as tea by 46%, bread by 38% and biscuits by 34%.

Emma Revie, CEO of The Trussell Trust, says “we never wanted to run an appeal like this, we would rather there was no need for food banks at all. But right now, they are on the frontline of this cost of living emergency – we have no other option.”

“Faced with the perfect storm of rising energy prices, inflation and a potential recession that is pushing people deeper into poverty, the soaring cost of living is driving a tsunami of need to food banks.

“Through this emergency appeal we hope to raise the vital funds required to ensure that food banks can meet this devastating rise in need and continue to support people who are experiencing hardship.”

She added that “as well as raising vital funds, we hope our emergency appeal is a stark reminder of how reliant we have become as a society on the kindness of volunteers.

“No one should need to turn to charity for something as essential as food and the situation we are facing is too great for food banks to solve alone.”

She also called on the government “to do what’s right and provide a package of support directly targeted at people on the lowest incomes”.

The dire warning comes as new research has revealed that millions of families are skipping meals or changing shopping and eating habits as they struggle with household finances.

The consumer research magazine Which? says among those who were struggling the most, 50% admitted their household was skipping meals. Its research also revealed 46% of consumers were finding it harder to eat healthily compared to before the cost of living crisis.

Critics say the ruling Conservative party is doing very little to help the growing poorer class of society despite the fact that inflation is hitting 40-year highs.

Studies show an unprecedented number of people don’t want to go to work because they are unable to afford basic hygiene products, according to one charity. A report by the Hygiene Bank, which conducted the research with YouGov, suggests 3.2 million of adults in Britain are in hygiene poverty and many are ashamed to go to work because they cannot afford basic items such as shaving products or soap.

The report says “the truth is by the time you’re not switching on your heating or you’re going to a food bank for food essentials, you’ve stopped buying essential hygiene products weeks before.”

Rising fuel prices have exacerbated the problem and new figures show almost half of UK adults are struggling to make ends meet. Data from the Office for National Statistics released on Tuesday showed that 45% of adults who pay energy bills were finding it very, or somewhat, hard to afford them, up from 40% in June.

New figures show almost half of UK adults are struggling to afford their energy bills, rent, or mortgage payments. The data from the Office for National Statistics show a rising percentage of the population is experiencing financial hardship amid the cost of living crisis.

Reports say that many households simply cannot afford to turn the heating on. In September, 45% of adults who paid energy bills were finding it very, or somewhat, difficult to afford them – up from 40% in June.

Those who are renting homes are reported to be finding it more difficult to survive and those who don’t own homes also found it harder to pay energy costs, with 60% in need of dire help.

Figures from a new poll carried out by Ipsos, show more than a quarter of people have started taking out loans from banks or family and relatives to buy food and a fifth have borrowed money to adapt to rising prices this year.

Gideon Skinner, head of politics research in public affairs at Ipsos, says “the levels of concern peaked in August and have slipped back to figures we were seeing earlier in the year. But it’s important to say that the absolute level is still pretty high.

“We are also seeing that people are now concerned about the whole of the economy more generally, rather than specifically cost of living and inflation. It’s not that people suddenly think everything is going to be fine.”

There is a extreme concern about how the rising cost of living crisis is affecting the more vulnerable groups in society, including the disabled and minority groups.

However, this is a recession that will be felt in most households both through the rise in energy prices and food prices as well as the soaring cost of borrowing.

Analysts says it is a recession that is certainly expected to bring the government down in the next general election.

  • source : Tehrantimes