Social Justice

The Bank of England says the cost of living crisis will last until 2023

Cost of living pressures on households will not ease until 2023, the Bank of England governor said - and will not stabilise until 2024.

cost of living, supermarket

Energy bills and increasing food costs are the main drivers of the cost of living crisis. Image: yisris/Flickr

The cost of living crisis won’t ease for another year and could last until 2024, according to the governor of the Bank of England.

Andrew Bailey, speaking to the BBC after the bank doubled interest rates to 0.5 per cent, said workers will face real-terms pay cuts.

“We’re going to start coming out of it in 2023, and two years from now, we expect inflation back to a more stable position,” he said.

“It is going to be a difficult period ahead, I readily admit, because we are already seeing, and we’re going to see, a reduction in real income.”

Household budgets are facing unprecedented pressure after inflation hit a 30-year high in December, despite stagnating wages. Soaring energy bills forced people to choose between heating and other essentials such as food – which is already increasing in price. Two-thirds of British adults have already been affected by the cost of living crisis in 2022, according to new data

And after Ofgem announced the energy price cap would rise by 54 per cent this April – adding £700 to the average annual fuel bill – people in the UK will face the biggest drop in living standards since 1990, when records began.

Post-tax incomes will fall by two per cent this year, the bank said. But Bailey – who was paid more than £575,000 in 2020 – warned workers against bargaining for pay rises to counter the rising cost of living because employers would pass on their higher costs to customers in the form of price rises, driving inflation up further.

“We do need to see a moderation of wage rises,” Bailey said. “That’s painful. I don’t want to in any sense sugar that message, it is painful.

“I’m not saying ‘don’t give your staff a pay rise’. This is about the size of it.”

This week chancellor Rishi Sunak announced a support package to help families through the cost of living crisis.

It includes April council tax rebates of up to £150 for people living in bands A-D and a £200 “discount” on October energy bills for all households, which will function as a loan to be paid back in £40 instalments over five years.

Analysts warned the proposals are “poorly targeted” and would not be effective enough to help low-income households avoid destitution.

Support the Big Issue

For over 30 years, the Big Issue has been committed to ending poverty in the UK. In 2024, our work is needed more than ever. Find out how you can support the Big Issue today.
Vendor martin Hawes

Recommended for you

View all
Almost no recorded cases of disability benefit fraud despite DWP crackdown: 'PIP fraud is a non-issue'
dwp pip/ disabled person
Disability benefits

Almost no recorded cases of disability benefit fraud despite DWP crackdown: 'PIP fraud is a non-issue'

Deaf man awarded £50,000 after 'oppressive' and 'discriminatory' treatment by DWP
dwp jobcentre
Department for Work and Pensions

Deaf man awarded £50,000 after 'oppressive' and 'discriminatory' treatment by DWP

The UK used to be the most LGBTQ-friendly place in Europe. Now, it's not even close
LGBTQ+ rights

The UK used to be the most LGBTQ-friendly place in Europe. Now, it's not even close

'We're at breaking point': Food banks see record number of first-time users as demand soars
food bank
Food banks

'We're at breaking point': Food banks see record number of first-time users as demand soars

Most Popular

Read All
Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits
Renters: A mortgage lender's window advertising buy-to-let products
1.

Renters pay their landlords' buy-to-let mortgages, so they should get a share of the profits

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal
Pound coins on a piece of paper with disability living allowancve
2.

Exclusive: Disabled people are 'set up to fail' by the DWP in target-driven disability benefits system, whistleblowers reveal

Cost of living payment 2024: Where to get help now the scheme is over
next dwp cost of living payment 2023
3.

Cost of living payment 2024: Where to get help now the scheme is over

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know
4.

Strike dates 2023: From train drivers to NHS doctors, here are the dates to know