He’d love a few cans of corned beef. John Stone then makes a kind of hash with potatoes and onion. “That is wonderful and it is good for you. Nutritious.” Hup, there go two more cans of meat in the shopping bag, which also contain pasta, beans and a bottle of shampoo.
John Stone is 76 years old. He wears thick glasses and a cap. And he’s been having trouble making ends meet lately. He and a friend stop by here every two weeks at the food bank in Smethwick, a small town attached to Birmingham, in the English West Midlands.
Stone has worked all his life as a driver for suppliers of fish and chips. But with the current rising energy prices, his pension is no longer enough. “I paid about £45 for gas and electricity, but that has gone up to £70 a month.” Converted an increase of about 30 euros per month.
Here at the Salma Foodbank in Smethwick, founder Imran Hameed and his volunteers do everything they can to provide people with food and other basic groceries. The racks in the small shed reach to the ceiling: they are full of cans of beans, soup and cartons of long-life milk.
According to Hameed, the run-up has increased by about 20 percent in recent months. “The reason people come to us has changed. Instead of because of layoffs or late payment of salaries, I now hear more often that they are being squeezed by energy prices.”
The United Kingdom is in the midst of a cost of living crisiswhereby fixed costs rise sharply for the first time in a generation. The costs for gas and light are increasing, as are the prices of food, clothing and fuel for the car.
Inflation was 5.4 percent last December, the highest rate in 30 years. And the predictions are that inflation will rise to 7.5 percent this year. In April, there will also be an increase in social premiums, which the government has introduced to pay for the higher health care costs due to the corona crisis.
Energy 54 percent more expensive
Already about 2.5 million of English households are struggling to pay their energy bills. That number is expected to double in the coming months, as prices continue to rise. Last Thursday became known that the maximum price for energy bills for consumers will rise by 54 percent, a record. Energy regulator Ofgem sets the maximum prices that energy providers can charge households, and the annual average costs for a household can increase by almost 700 pounds (840 euros) from April.
That is a lot of money for the customers of the Salma Foodbank. Peter James, who came to the food bank with his friend John Stone, puts it this way: “We have to choose between heating our home or buying food. Eating or heating. James, a stocky man in a fisherman’s hat, has a prepaid energy meter that requires him to pay in advance. “I put £40 a month on it, that was always enough. Now I only do it for two and a half weeks.”
More expensive energy is the main cause of price increases. And that trend may be international, but the United Kingdom is more affected than average, says deputy director Robert Joyce of the Institute for Fiscal Studies (IFS), an economic research institute in London. “A variety of factors were simultaneously against energy prices.” Last year, for example, there was a fire in a large power station that imports electricity from France. And there was no wind for months, so that the lack of wind energy, normally good for a quarter of the energy, had to be compensated with expensive gas.
Like the Netherlands, the United Kingdom is highly dependent on gas, including for its electricity supply. And the UK has relatively little gas in stock, less than the Netherlands. “Typical for the British market is that many houses still cook on gas. And our houses are pretty poorly insulated, which doesn’t help either,” says Joyce. A subsidy program to encourage residents to insulate their homes was launched last year discontinuedwhile only 10 percent of the targeted 600,000 homes are insulated.
John Stone can talk about this at the food bank. They just renovated the outside of his council flat, which helps, but the windows and doors are still drafty. He hasn’t had the central heating on for months, because he can’t afford it. “I put on two trousers and two jackets. Sometimes it is warmer outside than inside.” He goes to bed at 6pm to keep warm.
Stone and his friend James mainly blame the big energy companies. Stone: “Their shareholders want to see money. Have you ever heard those folks say, ‘That’s enough? No, they always want more.” James: “That’s right. And unfortunately it is always the poor elderly who are the victims.”
Since the beginning of 2019, the UK has had a system whereby regulator Ofgem sets maximum energy prices twice a year, in order to force energy companies to compete. This worked well with lower energy prices, and smaller providers came up with more attractive offers for consumers. But with prices rising, several dozen energy companies have been shut down in recent months went bankruptbecause they are not allowed to immediately pass on these higher prices to their customers due to the legal maximum and they do not have financial buffers of their own.
Mainly support for middle class
This system, with a biannual adjustment of the maximum prices in April and October, was once designed with a very different purpose, says Robert Joyce of the IFS, namely to break the power of the major providers. “Now you could say that this system has at least slowed down some of the financial pain for consumers. Whether that’s smart is the question. Much depends on how the government deals with rising prices.”
Thursday Finance Minister Rishi Sunak announced that he is allocating 9 billion pounds (10.7 billion euros) to compensate for the high energy bills. He divides the billions over two measures: in October, all households will be cut by 240 euros on their energy bills – a discount that must be repaid by the way. And residents of houses from the lowest category of the municipal tax receive a further 180 euros discount.
Especially that general discount is a missed opportunity to specifically spare the poorest households, they find at the IFS. Robert Joyce: “For example, if you were to increase benefits by the same percentage as the most recent inflation figure, you would hit exactly those who need the money the most. Such a scheme already exists, only on the basis of old inflation figures. This year, benefits will only increase by 3.1 percent: an outdated percentage.”
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These are simply not rational, but political decisions, Joyce also says. The government wants to show that it has an eye for the middle class. “That is their electorate. But when the government gives out money that you have to get back later, it’s risky. Because find a good time to make your voters pay back.” According to Minister Sunak, the British would have to repay the 200 pounds from 2023, with 40 pounds per year in each case. But does that come from it? Elections are now scheduled for 2024, but with Prime Minister Boris Johnson under heavy pressure for weeks, it could just be earlier.
Installment groceries
The financial perks are according to analysts in any case not enough to compensate the lower incomes in the coming months. All prices continue to rise, including groceries and petrol. Some UK supermarkets are now even offering installment groceries. Iceland, a supermarket chain with many frozen products, aimed at lower-income families, offers the possibility to pay off groceries between 25 and 75 pounds with 10 pounds per week. The catch is that they charge interest on this: about 3 pounds on a 75-pound shopping cart.
In Smethwick, Bailey Brighton has just walked out of the JobCentre, a kind of UWV office, a young woman with a black leather jacket and hat. She didn’t come for work, but got a voucher for the food bank. Brighton lives on benefits, she has had psychological problems for years. Every month she gets about 300 pounds (355 euros) deposited into her account. Her rent has already been deducted. “I have to deal with that. I was losing about 90 pounds every four weeks on gas, water and light, but that’s more now: about 30 pounds a week.”
The higher costs also add extra stress to Brighton. Among other things, she has debts with energy supplier SSE, which keeps sending her reminders. “Pay this, pay this now, or we’ll come and seize your stuff. I’ve already called to say I’m vulnerable and struggling to make ends meet. But the letters keep coming.” She tries to pay extra attention in the house, not to leave the lights on just like that and to use less water. It is not enough.
Bailey Brighton expects little from the government, she “stopped that a few years ago”. She has sometimes gone to the JobCentre to indicate that she cannot make it with her benefits. “I had nothing left: no money and no food. Then I got a tenner that I had to use to do my shopping for a month.” Fortunately, she has now discovered the food bank, she says. “With a bit of luck, you’ll get a bag full of groceries there that you can live on for a few weeks.”
A version of this article also appeared in NRC Handelsblad on 5 February 2022
A version of this article also appeared in NRC on the morning of February 5, 2022
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