UK has been suffering from cost of living crisis since 2021
Since late 2021, families in Britain have seen a huge drop in disposable income during the cost of living crisis as inflation pushed up prices of food, petrol and household items while wages failed to keep pace.
Inflation hit an all-time high of 11.1% in October 2022, far outstripping the government target of 2%, which has been missed for the last 18 months.
The cost of living crisis has pushed many families onto the breadline, with increasing numbers unable to afford fuel or basic groceries.
Rising inflation over the past 18 months has seen price hikes on everything from Lurpak to petrol, with inflation hitting a 40-year high of 11.1% in October 2022 and currently sitting at a slightly lower 10.1%.
This is way above the government's target of 2%, a level designed to maintain a balance to protect the economy.
If the rate of inflation goes too high, prices are pushed up and consumers suffer. If it is too low, the economy can become stagnant and hamper future growth.
The Bank of England expects to see inflation fall to 4% by the end of the year, anticipating a continued drop back down to 2% after that, providing a gradual easing in the cost of living crisis.
However, for the average household, there is likely to be a far longer road to recovery.
Food prices remain at record highs despite inflation falling for the third successive month in January as price drops take a while to make their way from suppliers to consumers, meaning people are still paying more for their weekly shop.
Meanwhile, ongoing issues with food supply chains (such as bird flu) are continuing to push up prices of specific goods.
Indeed, the Resolution Foundation said in September 2022 it predicts 3 million more people will fall into poverty in the UK, with household income expected to fall by £1,100 in 2022-23.
Ahead of chancellor Jeremy Hunt's budget next week, the foundation warned that people would continue to struggle despite energy costs and inflation falling.
Cara Pacitti, senior economist at the Resolution Foundation, said: “The chancellor will want his upcoming budget to signal a new, lower inflation and higher growth, phase for the UK economy. And there has certainly been some good news with the economy expected to be bigger and borrowing lower this year than feared.
“But there is no escape from having to focus on the cost-of-living crisis that families are still living through. Jeremy Hunt is likely to act to prevent April’s spikes in energy bills and fuel duty.