A cost of living catastrophe is what British families are facing in early 2022. The government has been understandably focused on Omicron but has woken up to this crisis, and is now discussing policy action to address it. But there is no magic bullet. What’s worse, this comes on the back of a decade of stagnant living standards.
The big-picture driver of the cost of living crunch is rapidly rising inflation, which is already at 5.1% and forecast to hit a 30-year high of more than 6% this spring. Fast price rises mean pay packets were already shrinking in real terms late last year – for the third time in a decade. Prior to the financial crisis, real wages basically never fell. The fact that it’s now become almost normal says a lot about the weak growth of our economy, and explains why Britain has spent the past 10 years or more in an unprecedented living-standards disaster.