- Director-General at the Confederation of British Industry, provided the following
description of the impact of Russia’s invasion of Ukraine and subsequent economic
sanctions on the cost of living in the UK:
On consumer confidence and cost of living, right now it is particularly acute for those people on low incomes. There are still some household savings elsewhere in the economy, but people on low incomes are already suffering, and they are about to suffer more on fuel bills, food costs and so on. I think we will probably have later in the year an impact on aggregate consumption, and therefore growth. I think one would have to say, given the inflationary pressures from the energy impact, you are going to see aggregate consumption hit later in the year. That is growth challenge No. 1.[1]
Mr Danker also added that business confidence was starting to waver. He said that on the whole there had been “high levels of optimism” from businesses about three months ago and that had been still the case until very recently, but things had changed since the start of the Russian invasion of Ukraine.[2]
- The cost of living impact on low income households described by Mr Danker needs
to be set alongside impacts from other sources, including Government policy measures.
On 31 January, prior to the Russian invasion of Ukraine we took evidence from several
witnesses on the cost of living. Robert Joyce, Deputy Director, Institute for Fiscal Studies,
told us then that initial ‘overnight’ effects from April 2022 of rises in energy prices and
the increase in national insurance would hit all households.[3] He described the combined
effects of all the measures across the year:
Taking the year as a whole, comparing next year with last year, which is also important because there are a lot of other things going on, it is clearer that the bottom overall will be having a worse year. That is mostly because, if you compare where they are now with where they were a year ago, they have lost about £1,000 a year in Universal Credit, if they were on that.
In combination with a slightly higher rate of inflation over the year as a whole faced by the poor, and the loss of that—albeit always temporary— increase in Universal Credit, over the year as a whole they will have seen more of a deterioration. It is less so for some of them: those who are both in work and on Universal Credit benefited from increases in Universal Credit in December.[4]
- During the same evidence session, Torsten Bell, Chief Executive of the Resolution
Foundation, agreed with this general outline, noting that:
The whole country is going to feel squeezed through 2022, and lower-income households are going to struggle most to deal with that. As Robert said, the
- ↑ Q117
- ↑ Q118
- ↑ Oral evidence taken on 31 January 2022, HC (2021–2022) 1094, Q7 [Robert Joyce]
- ↑ Oral evidence taken on 31 January 2022, HC (2021–2022) 1094, Q7 [Robert Joyce]
