Is the 'living cost crisis' over?

Growth is up. Employment is up. Wages have even started to rise faster than inflation. Surely any ‘living cost crisis’ must now be over?

Unfortunately, the depth of the crisis is such that it will take many years of similar progress before workers recover the economic position they enjoyed before 2008. Working people are now on average £1,600 a year worse off since the last election because wages have lagged behind prices. And the positive figures on wages exclude the estimated 4 million workers – around 15% of the total – in the UK who are self-employed. In fact, ‘self-unemployment’ would be a more accurate description for many in this group.

As recently as August 2014, Mark Carney, the Governor of the Bank of England, said that the cost of living crisis was still threatening the UK economy, with millions of British households ‘heavily indebted’. With interest rates likely to increase in the coming year or two, life could get even tougher than it is now for many. And for those out of work, poverty will deepen further as benefits are being continually cut.

The autumn statement is unlikely to make much difference here. George Osborne has little capacity for big giveaways as tax revenue is lower than expected. He might, however, increase personal tax allowances still further, which could help some, although interactions with tax credits will be important here, and such reforms do nothing to help those out of work or currently below the tax threshold.

The Chancellor might be tempted to cut benefits further to raise revenue, but, as it is, we are likely to see increases in evictions from rented properties and demand at food banks in 2015 as people struggle to survive on benefits.

The autumn statement is unlikely to do much to help the 13 million people in poverty, half of whom are in employment. A different, more radical approach is needed from the one we are likely to see in the autumn statement.

Karen Rowlingson, Professor of Social Policy, University of Birmingham