Peter Aldous writes for ConservativeHome.
With reports of the appalling consequences of Russia’s invasion of Ukraine dominating the news, along with sobering predictions about the impact on energy costs, it is easy to forget that the cost-of-living crisis in the UK predates the conflict.
Inflation has been steadily rising since the middle of last year. The poorest in society, who spend the greatest proportion of their income on essentials, are most exposed to the increase in the cost of food, energy and other essentials. Following a decade in which benefits were frozen and cut in real terms, a growing gap between incomes and costs has become even more pronounced.
It goes without saying that the impact of the conflict in Ukraine on British citizens does not compare to that faced by the millions of Ukrainians whose lives have been thrown into terror and chaos. But neither can we ignore the significant economic impact the conflict will have on our constituents.
The impact on household budgets will be significant. Families already facing the most difficult circumstances must now bear further increases in the cost of heating their homes, feeding their families, and other essential costs. The terrible reality is that many are already going without the very basics and taking on debt just to get to the end of the month, along with all the worry and dread that comes with it.
While the Government has announced measures to support households with rising energy costs, they are no longer sufficient in scale or precision to reach those most at risk, covering only half of the average increase in energy bills and delivered in part via a loan which must be paid back.
In this context we must ask ourselves whether we can justify a real-terms cut to benefits in just a month’s time. Benefits are due to be uprated by just 3.1 per cent in April, based on inflation last September – which is less than half the rate of inflation now.
The independent Joseph Rowntree Foundation predicts that 400,000 people could be pulled into poverty by this real-terms cut, with nine million families who receive means-tested benefits becoming on average £500 per year worse off as a result.
However, these figures – which account for the Government’s already-announced package of support measures – are based on inflation forecasts of seven per cent. With oil and gas prices now spiralling upwards, inflation may now exceed this, with conservative estimates projecting it will reach eight per cent in April.
This real-terms reduction is being imposed on benefit levels that are already at too low a level. It is easy to overlook the fact that, prior to the pandemic-induced £20 uplift to Universal Credit, this benefit had been frozen for four years.
The value of our main out-of-work support has now been eroded to the point that it is wholly inadequate to protect families from harm. My voice was among those warning that the removal of this uplift last October was a mistake, because of the harsh impact it would have on the poorest in society. That impact is now even worse than feared.
Let us not underestimate the impact another cut to benefits will have on our constituents. There can be few who have not, at some point, considered the impact of the rising cost of living on their own situation over the last few months. But the anxiety felt by those on the lowest incomes is omnipresent.
As Conservatives, we believe in giving people the stable foundations on which to progress and thrive. We should recognise that an effective social security system is a crucial mechanism for delivering this, providing security and stability when events beyond people’s control create turbulence. When people’s lives are already often difficult and complex, can we really expect them to thrive if they are gripped by anxiety about how to keep warm and to feed their families?
In the Spring Statement, the Chancellor is likely to come forward with new measures to support people in the coming months, with a focus on the ‘squeezed middle’. Whilst he would be right to do this, we must not allow this to detract from the need to support those at the very bottom.
The scale of the harm to living standards for those on the lowest incomes should leave us very concerned. We have a responsibility to protect our constituents from the worst impacts of rising costs. Awareness of the real-terms cut coming down the track may not be widespread, but the impact on living standards in the current context could be far greater. Let us not make the same mistake again.