Speaking earlier this month, Chancellor Jeremy Hunt’s announced that the UK has narrowly avoided a recession, seeing zero economic growth towards the end of 2022. The situation remains precarious. With a quarter of UK households regularly unable to pay for essentials and food banks struggling to support record numbers of users who are in work, the cost of living crisis is placing an unsustainable burden on ordinary people across the country. In response to economic insecurity, we have seen the most extensive strikes in the public sector in decades.
What has caused the cost of living crisis?
A cost of living crisis is, put simply, when the cost of everyday essentials rises much faster than average incomes. A few different factors have led to the current crisis, which has been worsening since 2021. The most significant is high levels of inflation. In October 2022, it reached a 41-year high of 11.1%, making goods and services less affordable for many households. Consumer prices were up by 10.1% at the start of the year according to the Consumer Prices Index, partly due to strong demand and supply chain bottlenecks. The pandemic is a major factor in supply shortages, as demand for products suddenly increased following the global easing of pandemic restrictions.
Rising food and energy prices have also contributed to inflation – domestic gas prices are 129% more expensive compared to the beginning of last year. Electricity prices have also risen by 67%, which is of course linked to Russia’s invasion of Ukraine which has caused cuts in Russian oil and gas supply. Faced with these challenges, the UK is worse off than some comparable economies. For example, our 10.1% annual inflation rate was higher than the Eurozone average (8.5%) and that of the US (6.1%).
Young people are struggling to make ends meet
This is a crisis that has impacted everyone. According to the ONS, 94% of adults in Great Britain said that their cost of living had risen compared to last year. We have rightfully seen a lot of media coverage focusing on how low-income households and families are coping, but less airtime has been given to young people. Millennials are generally worse off than their parents’ generation was at the same age, and they and Gen Z have been placed in the unfortunate position of beginning their careers in a harsh economic climate.
According to Deloitte, 40% of this demographic has been forced to find extra work to support themselves financially, and nearly half spend all of their monthly income on living costs. A poll by Sky News and Ipsos has also highlighted that young people are especially likely to fall into debt in order to pay their bills because they often do not have savings to fall back on. They are twice as likely to have missing energy bill payments compared to the general public, with 19% reporting that they have borrowed money to pay them. The crisis has increased feelings of loneliness and isolation among young people, many of whom are choosing work over socialisation or moving in with their parents.
Charli, an English student at the University of Bristol, says that the situation has forced her to make some tough decisions. “With the cost of living, my maintenance loan doesn’t cover my rent and I don’t get help from family so I have to work to live. The cost of living crisis means I have to work more and sacrifice my grades or my mental health.”
She says that the University does not offer enough support for struggling students. Its official advice for students who have a job is to work no more than 15 hours per week, but this is unrealistic for people like Charli, who works 16-35. “It never affects my deadlines but it affects my sleep, overall health and has resulted in me increasing my antidepressant dose to the max.”
What can be done by the government?
According to the OBR and the Bank of England, the annual inflation rate is expected to ease later this year, slowing to about 4%. This is due in part to the alleviation of supply bottlenecks and falling wholesale gas prices. However, the pressure on households will still remain strong – a decreased rate of inflation just means that prices will rise more slowly than before.
In 2022, the government put a package of measures into place to try and mitigate the impacts of the crisis, including ÂŁ400 off energy bills for all households, ÂŁ650 payments for households receiving means-tested benefits and a 5p cut to fuel duty. However, its response to the crisis has been inefficient, with September 2022’s deeply unpopular “mini-budget” under Liz Truss leading to her resignation.
The UK is one of the worst affected among the world’s advanced economies partly because of the government’s failure to help the situation, for example by raising the household energy price cap, National Insurance and Council Tax. Unemployed people receive less support than the OECD average and UK salaries have stagnated since the financial crash of 2007-2008.
Young people today are a generation of renters; high rents and living costs have left them with less disposable income than previous generations. Getting this generation on the housing ladder and ultimately improving the UK’s productivity and economic growth are problems that this country has been grappling with for years. In the short term, to mitigate the burden of student loan repayments on struggling young people, the government could reconsider its decision to freeze the threshold for repayments rather than have this rise in line with average income. Additionally, all young people need better and more consistent access to financial education.
What can be done by universities?
Universities could arguably also be doing more to help students. The University of Bristol recently provided a ÂŁ100 cash payment to those in receipt of the highest level of University of Bristol Bursary, Access to Bristol or Bristol Scholars support to help with rising living costs. It has also increased the budget for its Financial Assistance Fund, which all students can apply for, from ÂŁ600,000 to ÂŁ1 million.
However, these measures could be made more accessible. Those who do not qualify for the maximum student loan and bursary, but are unable to receive substantial financial help from their family, are unlikely to be able to cover living costs and rent through borrowing alone. Struggling students in this category may find it difficult to meet the substantial requirements of Bristol’s hardship fund. The University has also remained silent on the issue of the lack of accommodation in Bristol, with students looking for housing for the next academic year, perhaps for the first time, left to fend for themselves in an oversaturated market with skyrocketing rents.
The majority of young people think that the UK’s political system works well for high earners and large businesses, but not for people like them. And it is not difficult to see why the government is less inclined to offer them support – the UK’s biggest voting indicator is age, and the younger demographic generally avoids voting Conservative.
However, to improve the economy in the long term we need to invest in this generation. If training and development opportunities are made more easily accessible, young people will be able to apply for higher paying roles and avoid unemployment. In a situation that seems hopeless, young people need aspirations and a belief that the future will be better. Otherwise, they are more likely to be stuck in the vicious cycle of poverty.