Tackling child poverty - progress report 2022 to 2023: annex d - cost of living focus report

Introduction

The 'cost of living crisis' is the widespread term used since early 2022 to refer to the ongoing economic pressure for families who are seeing the cost of everyday essentials, like food and energy, increase at a much faster pace than household incomes.

The cost of living crisis is having the greatest impact on low income households who spend a greater proportion of their income on essentials and who have the fewest financial resources at their disposal to help cope with increased costs.^[1]

The sudden and rapid rise in costs of energy and food has meant that people on low incomes have simply been unable to afford an adequate standard of living. Lower income households are more likely to have no, or low, savings, more likely to be in debt or arrears and, if in employment, more likely to be in insecure work entailing variable pay.^[2] Further, while inflation has fallen from its highest level in October 2022, it remains high^[3] and the inflation rate for food and non-alcohol beverages continues to rise – reaching 19.1% in April 2023 (an increase from 16.4% in October 2022).^[4]

This report examines how the crisis has exposed financial vulnerabilities, reviews the specific impacts for different family types and considers how households are reacting to their current straitened circumstances. By focusing on a period of heightened financial strain, this report, by way of critical review of the evidence, provides important insights into which challenges are the greatest for households and how families may best be supported.

Structure of this report

Firstly, this report looks at lessons learned from recent economic crises, that is the 2008 financial crisis and the impacts of the COVID-19 pandemic. Lessons learned were drawn to support our understanding of impactful policy making during the current cost of living crisis.

This reports follows with detailed impacts of the ongoing cost of living crisis. In particular it explores impacts on wellbeing, financial pressures, food insecurity, energy and housing.

While the ongoing crisis is focused around the cost of living, this report also explores impacts of price increases on the two other drivers of poverty, that is income from employment and income from social security.

Then, the report provides a brief summary of how the cost of living crisis is impacting on each of the six priority family types most at risk of poverty.

Finally, the report explores generic issues to consider when designing policies to support families in need. Specifically, it focuses on debates concerning targeted or universal interventions, the stigma surrounding access to interventions, and the need for longer-term systemic change.