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Working poor look to Sunak to soften the blow of soaring UK fuel costs

The fun things come first, explained Michelle Nicholls, a self-employed cleaner in the English town of Harlow, Essex, north-east London, who earns £8,000 a year.

Since grocery costs hit the escalator and petrol prices have soared, the 47-year-old and her partner, who works as a delivery driver and grosss £25,000 gross, have had to cut back on their weekend trips to see friends and family as well as the occasional nights out.

Next up will be her dance classes and trips for her 13-year-old son, Nicholls said. In recent weeks, the cost of her basic weekly grocery shopping has gone from £80 to £119.

With utility bills doubling next month and Social Security contributions rising, she’s not sure how the family will cope. “There’s not much left to go out and have fun. That’s already bruised,” she said.

As economic shocks from the war in Ukraine continue to fuel inflation, Chancellor Rishi Sunak is under mounting pressure to find ways to mitigate the worsening cost-of-living crisis when he makes his spring statement next week.

In Harlow, 61% of residents have less than £125 a month disposable income © Charlie Bibby/FT

Harlow, where 61 per cent of residents have less than £125 a month in disposable income, according to the council, has been particularly hard. The city, which is predominantly white and working class, has been a leading parliamentary seat held by the ruling party since the 1980s. Incumbent Conservative MP Robert Halfon is a longtime campaigner against the fuel tax.

For low-income earners like Nicholls, inflation is a cruel afterword to the coronavirus pandemic. It limits their existence and creates renewed fear, as things had opened up after two years of social isolation.

“I know there is no magic money tree in Downing Street but I hope they can help us,” Nicholls said.

Harlow Councilor Dan Swords: “There are times when everyone needs help and this is one of them.” © Charlie Bibby/FT

“People don’t blame government for these problems, but they will if they don’t do something about it,” said Dan Swords, at 21 the youngest councilor in Harlow, who helped the Conservatives to become the traditional Labor council last May to win by campaigning for a cut in local taxes.

“There are times when everyone needs help and this is one of them,” he said, arguing that after all the restrictions imposed during the pandemic, the government has a greater responsibility to help people recover. “Just taking out the spike won’t be enough.”

A typical family’s disposable income could fall by 4 per cent, or £1,000 in real terms, over the 12 months to April 2023, according to the Resolution Foundation think tank. The poorest will be hit hardest, as they spend a larger proportion of their income on food and energy income, where prices are likely to rise the most.

Household budgets are feeling the effects of the crisis: food inflation is at its highest level since 2013, as are petrol and diesel prices hit record level. But the squeeze is set to worsen dramatically from next month through a combination of tax hikes and a rise in the average annual energy bill to nearly £2,000, even as wages and benefits lag inflation.

Bar chart of change in contribution to annual CPIH inflation (percentage points) January 2021 to January 2022, UK showing the surge in inflation driven by energy bills and petrol

the The Bank of England warned on Thursday that the fallout from Russia’s invasion of Ukraine could push inflation to 8 percent in the spring, adding that monetary policy is powerless to stem the energy shock hitting UK revenue and spending.

The Institute for Fiscal Studies has calculated that Sunak would need to fork out an extra £12billion if it wanted to offer the same level of protection from rising prices as it intended revealed a £9bn package to help households with soaring energy bills in February.

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Laura Ciftci, Principal at Jerounds Primary Academy, sees a steady increase in students qualifying for free school meals © Charlie Bibby/FT

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Siobhan Dean, Learning Support Assistant at Jerounds: ‘There will come a point when people like me have to start selling things’ © Charlie Bibby/FT

The Harlow Citizens Advice Bureau has found that the number of people needing help with energy debt has increased by 127 per cent since last year. There has also been a steady increase in the number of students qualifying for free school meals, according to Laura Ciftci, principal at Jerounds Primary Academy.

Halfon has urged the government to cut fuel taxes and ease environmental taxes on energy bills to ease the pain. He has a track record of similarly successful campaigns in the past and has been described by David Cameron as Prime Minister as “the most expensive MP in Parliament”.

“It’s the people who have only dealt with management who find it the hardest. These are not people who sit on the couch at home all day. They work,” he said, arguing that the Treasury should use a £3bn VAT windfall from rising fuel prices.

Steve LeMay, the retired owner of a large family business in the city, echoed Halfon in urging the government to cap tariffs on gasoline. “There will be people who will think that when it goes to 2 pounds per liter they will not be able to use their car anymore.”

At Jerounds Academy school, Siobhan Dean, a learning support assistant who makes a net salary of £1,000 a month, has already decided to stop using her car. Her husband, who works in building maintenance, volunteered for a 20 percent pay cut during the pandemic and the family of three has struggled.

The government, she argued, should force energy and oil companies to save some profits in buffer accounts in good times to keep consumer prices at sustainable levels in moments like these.

Taxi driver Martin Davies: ‘It’s going to be a bit like during Covid. Even though you’re earning more now, the cost is wiping out all your profits’ © Charlie Bibby/FT

“There’s going to be a point where people like me have to start selling things,” she said, adding, “We’re seeing families having to make a choice between heating their homes and feeding their kids.”

Meanwhile, inflation is undermining the economic logic of some jobs. The cab drivers at Harlow station were desperate. Martin Davies, who has been a taxi driver for 15 years, said that with diesel prices at £1.79 a liter he needed to earn £550 a week to break even after paying for the minicab agency and renting his car . But his customers were crowded and used fewer taxis.

“It’s going to be a bit like during Covid. Although you are earning more now, the expense is taking all of your profit.”

https://www.ft.com/content/6f6eed94-8e3d-4346-86cd-38cabf2b81ca Working poor look to Sunak to soften the blow of soaring UK fuel costs

Adam Bradshaw

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