Unless you have been living under a rock, you are probably aware of the issues people in the UK are currently facing regarding the cost of living. While I understand that this is not a UK-only issue, this is where I am based. So, this will be where I am focussing my attention for the purpose of this blog.
What is the Current Situation With the Cost of Living?
At the time of writing, food bank use is at an all-time high and a quarter of UK children are living in poverty. Heating bills have doubled and the value of the pound is at an all-time low. Petrol and diesel cost more than ever before. There are almost daily increases in their food bills and inflation is currently 8.6%. The cost of living crisis is growing and it looks like things will only get worse.
No matter which way you look at it, things are tough. Families are finding that money simply doesn’t stretch as far as it used to. The elderly are discovering that their pensions aren’t worth as much as they should be. Children are going to school hungry because their parents can’t afford to put food on the table, but don’t qualify for assistance from the government. Even those on relatively good incomes have found that increasing food and fuel costs are placing excessive pressure on their finances.
So, what is the government’s answer to helping those families who have already cut back on everything that they can?
The answer? When it comes to helping those who are struggling most with the cost of living crisis, there is very little assistance.
The Tory Answer to the Cost of Living Crisis
Before the new Prime Minister came to Downing Street, the government had announced a series of winter fuel packages. These were designed to help cover the cost of rising bills. But, the reality is that these will not go very far for those who are hit with bills hundreds of pounds higher than they were last year. There have also been announcements about potentially reducing support for those on universal credit. This will place those already in severe financial difficulties into an even worse situation. Instead of helping those who desperately need the money, the Prime Minister announced a massive tax cut for the wealthiest and the removal of caps on Banker’s bonuses; citing “trickle-down economics” as the reasoning behind this decision.
What is Trickle Down Economics?
In simple terms, Trickle Down Economics is the belief that by providing more wealth to those at the top, the benefits will eventually trickle down to those at the bottom of the pile. In reality, however, the theory is flawed and it very rarely works. Those who already earn millions will already have plenty of money in the bank and are unlikely to spend more. It doesn’t help to create jobs and it won’t enable those living below the breadline to feed their families.
The immediate impact of this policy was to send the value of the pound into a nosedive. This resulted in the Bank of England announcing that they would be using reserves to buy back government debt in the form of bonds. There has been criticism from all sides, and questions have been met with a lack of clear answers. In fact, the Prime Minister seems to not even understand her own policies. Repeatedly, she has incorrectly stated that heating bills would be capped at £2500 when this isn’t actually true. It is the unit price which has been capped. If people use more fuel, they will still pay more for it.
On a Personal Level
I have shared my personal financial story a number of times here. So, many of you will be familiar with the circumstances we have previously had to manage as a family. Generally, we are better off now than we have been in the past. But, that doesn’t mean that the cost of living crisis isn’t affecting us.
As a content writer, a lot of what I do is essentially marketing. I write things which make products or companies seem more appealing. The people who hire me are essentially paying for advertising. When times are hard, companies will generally spend less on their advertising budgets. This will often mean a reduction in the number of projects for people like me. This has placed pressure on our finances at a time when our food bill has increased by £50 per week, even though we switched supermarkets. Our mortgage payments have also risen due to the increases in interest rates. This is likely to get worse. We are going to avoid putting our heating on for as long as possible in the hope of saving money. Our petrol costs have doubled over the last year, despite actually traveling less frequently.
We are lucky that we have been in a position to absorb most of these additional costs. This doesn’t mean, however, that we are immune to the cost of living crisis. It is now getting to a stage where we are having to think about extra ways to trim the fat from our spending and reduce our costs. If things are getting harder for us, I dread to think of what things must be like who were already in a more challenging financial position.
The Bottom Line
If Liz Truss and her Tory cronies don’t act soon, the result will be hard-working families who can’t afford their mortgage payments, put food on the table or turn on their heating. Families will sink into poverty and there will be increased pressure on already over-stretched food banks.
Those at the bottom end of the scale need help, and they need it now. History has shown that making the rich richer doesn’t create more industry and spending. Millionaire business owners aren’t suddenly going to give their employees better wages just because they are thousands of pounds a year better off.
It, quite simply, doesn’t work that way.
Here in the USA, “trickle-down” has been touted by politicians as THE answer for decades. As an economic measure, it has never worked in any struggling worker’s behalf. It’s safe to assume it never will.
Trickle down economics almost never works. All it does is make the rich richer and the poor poorer. It’s like a twisted, reverse Robin Hood.