Written by: Sarah Coles | Hargreaves Lansdown
- US bank, Citi, has forecast that CPI will hit 18.6% in January. It expects the energy price cap to rise to £3,717 in October, then to £4,567 in January and £5,816 in April.
- Higher prices for the essentials will hit those on lower incomes harder – because they spend a bigger chunk of their earnings on them. It means their inflation rate will be even higher.
- There are already 10 food groups that have seen their prices rise more than 18.6% in the past year, including bread, milk, pasta and butter
Inflation at 18.6% would push millions of people into dire straits. And because these horrible price hikes are being driven by the essentials people need to stay alive – like food and heat – it’s going to hit those on lower incomes hardest, who’ve got nothing left to give.
A winter of woe is looming amid these frightening forecasts and there is little help in sight to stop a spiral of debt as Shocktober approaches.
The hikes in the energy price cap are responsible for the lion’s share of the increase. The Bank of England had forecast for inflation to peak at 13% in the autumn, but gas prices have been climbing ever since, and Citi says it’s going to get far worse,
It’s going to hit those on lower incomes harder. Using these calculations, someone in the lowest 10% of earners could spend an average of 41% of their total income on energy by April – even before they’d put a roof over their head or fed their family. Someone living entirely on the full flat rate state pension could spend 60% of their income on energy by that point. Given that the price of everything else is also soaring, it’s going to be impossible for huge numbers of people to stay on top of their bills. Food prices are also climbing into the stratosphere, with the prices of some staples up well over 25% in a year already.
Those who had saved anything during the lockdowns may well be forced to eat into their savings, while those with nothing left may be forced to borrow – if they can. Anyone carrying variable-rate debts will then be hit even harder when the Bank of England hikes rates to try to keep a lid on prices. Rising prices and tightening belts are also making recession more likely – which would force people out of work, and make a desperate situation completely impossible.
We can still cling to the hope that there will be more help on offer. However, so far, Liz Truss, the frontrunner in the leadership election, hasn’t promised anything concrete to help with bills beyond cutting green levies and VAT – which are a drop in the ocean. There may well be more forthcoming as prices rise, focused on those who are most vulnerable and least able to cope with rising costs. However, we just don’t know. If we have to wait for an emergency Budget well into September to find out, it means weeks of desperate worry and uncertainty on top of everything else.
Supermarket prices that are already up more than 18.6%
- Low fat milk 34%
- Flour and other cereals 29.7%
- Whole milk 28.1%
- Butter 27.1%
- Pasta and couscous 24.4%
- Olive oil 23.6%
- Margarine 22.5%
- Mineral or spring water 22%
- Sauces 21.2%
- Jams, marmalade and honey 21.2%