Navigating the Cost of Living Crisis in Britain: Government Support Programs and Energy Price Fluctuations

The cost of living crisis in Britain continues to take a toll on households across the country, with many struggling to make ends meet as inflation and rising costs of essential goods and services eat into their budgets.




According to a recent study by the Financial Conduct Authority, as many as 10 million people in Britain are currently facing financial difficulties. While inflation has dropped from its peak of 10.1% to 8.7% in May, the cost of goods in supermarkets and on high streets remains high, with many families still feeling the effects of sky-high energy bills from the long winter.




The most recent data from the Office for National Statistics (ONS) shows that food prices have increased at their fastest rate in almost 45 years for the year to April. As a result, 44% of adults have responded by spending less on groceries and essentials, opting for cheaper alternative brands. Additionally, 50% of shoppers are buying fewer items altogether, while 67% have noticed an increase in their cost of living within the past month, and 97% have been impacted by rising grocery costs.




Low-income families have been hit particularly hard by the cost of living crisis, with many struggling to make ends meet. To address this issue, the government introduced the Energy Bill Support Scheme, which provided eligible households with £400 in monthly instalments of £66 and £67. Although the scheme expired at the end of March, the government has announced further financial support programs worth up to £1,350 in total.




Eight million eligible means-tested benefits claimants, including people on universal credit, pension credit, and tax credits, will receive £900 in instalments from this spring, with the money going directly to bank accounts in three tranches. Additionally, there will be a separate £150 payment for more than six million people with disabilities and an extra £300 for over eight million pensioners.




The payment windows for these programs are as follows:




First cost of living payment (£301) – already issued between 25 April and 17 May (or 2 to 9 May for people on tax credits but no other low-income benefits)

Disability payment (£150) – during summer 2023

Second cost of living payment (£300) – during autumn 2023

Pensioner payment (£300) – during winter 2023/4

Third cost of living payment (£299) – during spring 2024

In addition to these financial support programs, the government provides state support in the form of benefits and pensions payments. These payments will be going out as usual in July, with no bank holidays scheduled to confuse delivery dates.




However, the Energy Price Guarantee (EPG), which was introduced to ensure households paid no more than £2,500 for their electricity and gas, has now expired. Consumers will once more be paying the Energy Price Cap (EPC) rate, which will be £2,074 from 1 July, reflecting recent drops in wholesale energy prices. While this is a significant drop from the rates of the last two years, it remains more than £1,000 a year above pre-pandemic levels.




Consultancy firm Cornwall Insight predicts that July’s fall will be followed by another drop in October, when it expects the typical annual bill to be £1,976. However, it believes that the typical bill will then rise again in January 2024 to £2,045, and energy prices are not expected to return to pre-Covid levels before the end of the decade at the earliest. Customers are also warned that prices remain subject to wholesale market volatility, with the UK’s reliance on energy imports meaning that geopolitical incidents like the war in Ukraine could continue to have a detrimental impact.




In conclusion, the cost of living crisis in Britain continues to be a significant challenge for many households, particularly those on low incomes. While the government has introduced financial support programs to help alleviate the burden, rising costs and inflation remain a significant concern. Consumers should be aware of the expiration of the Energy Price Guarantee and prepare for potential fluctuations in energy prices in the years to come.