Impact of the cost of living on public wellbeing

The rising costs of fuel, food and other essentials are combining with existing disadvantage and vulnerability and putting many households at greater risk of both immediate hardship and reduced opportunity and wellbeing


Key messages

  • The rising costs of fuel, food and other essentials are combining with existing disadvantage and vulnerability and putting many households at greater risk of both immediate hardship and reduced opportunity and wellbeing.
  • Councils and local partners have delivered remarkable services and support and will continue to do what they can to protect people against higher costs, targeting help at those facing the most complex challenges. The LGA is working with councils to take a cross-cutting approach to addressing cost of living pressures, bringing together services including health, housing, welfare, social care, employment, transport, libraries, education, and climate change adaption. Our cost of living hub contains case studies, resources and data to share best practice and help councils support their residents. 
  • Given the scale of challenges that people will face this winter, it will be essential for Government to take a cross-departmental and collective approach, working with local government and its partners, to develop immediate support and long-term solutions to the cost of living. 
  • Councils’ range of front-line services play a vital role in protecting residents from rising costs; preventing the most vulnerable from falling into destitution and helping to build households long-term financial resilience. As leaders of place, councils are also essential in driving strong and inclusive local economies, through their economic development functions and measures like increasing the supply of affordable housing, integrating skills and employment provision, and prioritising vulnerable households to benefit from energy saving initiatives. 
  • We cannot therefore support our most vulnerable residents through the cost-of-living crisis without adequately resourced and empowered councils. As the LGA has outlined in our submission to the Chancellor’s Medium-Term Fiscal Plan, councils face additional cost-pressures of £2.4 billion this year alone, which will need to be addressed to avoid further cuts to vital frontline services. 
  • It is the LGA’s view that the mainstream benefits system should provide the principal safety net for low-income households, allowing councils to target additional discretionary support to those who are most vulnerable. We therefore continue to call on Government to provide a fair, accessible and sufficient safety net, that provides financial stability for low-income households and enables people who are unable to work to live well.
  • The Household Support Fund, which has provided the most vulnerable residents with vital financial support, is set to come to an end in April 2023. It is vital that Government ensures councils have long-term adequate, sustainable resources to provide targeted and effective crisis support, alongside services which increase opportunity and lift people out of poverty for good. 
  • The rising cost-of-living is pushing an increasing number of people into food insecurity. We believe that the Government’s response to the National Food Strategy represents a missed opportunity to tackle the underlying causes of food insecurity, childhood obesity and the affordability of nutritious food. As well as reforming the national benefit system so that it covers households’ essential costs, government should re-consider strengthening and expanding targeted measures, including expanding access to Free School Meals and the Healthy Start Scheme.  
  • Even after the government’s recent interventions to mitigate the impact of rising energy costs, a significant and rising number of people are currently living in fuel poverty and will struggle to heat their homes this winter. More people living in cold and damp homes poses a significant threat to public health and will exacerbate existing health inequalities. Alongside further sustained national support to help residents who are living in cold and damp homes, the government must work with councils to accelerate action to decarbonise energy and insulate homes at pace. 
     

Strengthening local responses to the cost-of-living

The dramatic increase in inflation in recent months, alongside increases to the National Living Wage, have added £2.4 billion in extra costs onto the budgets of councils this year. In 2023/4 councils are facing a funding gap of 3.4 billion, with a funding gap of £4.5 billion the following year. Despite a recent increase in funding for local government, having shouldered a disproportionate share (some £15 billion) of public sector savings between 2010-2020, any further reductions in real terms funding for local government will have a direct impact on local services people need and have come to expect. Cuts have consequences: for waste collections, libraries, social care for young people and vulnerable adults.

Measures to contain energy bills are welcome but despite this, without immediate additional funding, councils will face increasingly stark decisions about which services to stop providing as rising costs hit budgets: meaning not just isolated closures of individual facilities but significant cuts to services, including those to the most vulnerable in our society. Despite wanting to protect residents from further cost pressures, council tax rises will be inevitable as councils struggle to plug the gaps in their budgets. Any cuts to core or grant funding would exacerbate these challenges and service reductions still further.

We are calling on Government to provide councils with adequate funding to cover cost pressures, with long-term funding certainty, so they can confidently plan and continue to deliver the services communities rely on.

The introduction of the Household Support Fund (HSF) has re-bolstered local welfare support and has enabled councils to target vital additional support to those most in need. The fund is due to come to an end in March 2023 and without an adequate replacement, this will amount to a significant rollback in resources for local crisis support and welfare provision. We are calling on Government to maintain a form of separately identified funding for local welfare, as they have through the HSF, to ensure councils have adequate, sustainable resources to provide targeted and effective crisis support, alongside services which increase opportunity and lift people out of poverty for good.

In the longer-term, councils must be given the freedom and flexibility to lead local approaches which build strong local economies in the longer term, including increasing the supply of affordable housing, integrating skills and employment provision, and prioritising vulnerable households to benefit from energy saving initiatives.

Tackling food poverty

  • The combination of inflation, wage stagnation and real-terms cuts to benefits is severely impacting households’ ability to afford essential costs. As the cost of food continues to rise and other inflationary pressures restrict household budgets, access to sufficient and nutritious food is increasingly out of reach for a greater proportion of the population. Without effective and meaningful intervention, rising food poverty will cause hunger, drive health inequalities and result in poorer life chances. 
  • It is estimated that consumers are now paying £571 more on average for their groceries than last year. Latest data from the Food Foundation found that 18.5 of households experienced food insecurity in September this year, which is defined as eating less or going a day without eating because they could not access or afford food. 
  • Food poverty is a driver of poor physical and mental health, including chronic diet-related conditions such as obesity and cardio-vascular disease. For children, experiencing food insecurity can limit their development and affect their ability to concentrate and engage in school, impacting their educational attainment and long-term life chances. 
  • We believe that that the Government’s response to the National Food Strategy, and the decision to only take forward a limited number of the Strategy’s recommendations, represents a missed opportunity to tackle the underlying causes of food insecurity, childhood obesity and the affordability and access to healthy, nutritious food.  As insufficient income is the primary driver of food poverty, reforming the national benefit system so that it covers households’ essential costs would be the most effective intervention to tackle increasing food insecurity. Government should also re-consider strengthening targeted measures to tackle food poverty and improve access to healthy food:
  • Healthy Start scheme: provides pregnant women and families with children under 4 years of age, who are in receipt of a qualifying benefit, with additional money each week to buy nutritious food including fruit, vegetables, vitamins and fresh milk. We are calling for the Government to:
    • Extend Healthy Start to children up to the age of 5, to close the current gap in support between healthy start and free school meals. 
    • Shift from an “opt in” to an “opt out” registration system through an automated process, to help remove any barriers families face when applying online. 
    • Invest in an awareness raising campaign to promote uptake of the vouchers amongst eligible families, funded by underspend from the scheme.
  • Free school meals: Children are currently only eligible for FSMs if their family receives a qualifying benefit and has an annual household income under £7400. As a result, 1 in 3 children living in poverty – equating to 800,000 children – are not eligible for FSM. We want to work with the Government to find a solution that means all children facing food insecurity are entitled to a school lunch. For example, Government could consider introducing universal provision of FSM to all primary pupils in England. Currently, 11 percent of children eligible for FSM do not access the offer. Government should move to a system of automatic enrolment to ensure no child misses out due to lack of awareness of the scheme. 
  •  As well as playing a crucial role in reducing hunger and hardship for the poorest children, widened access to healthy start vouchers and free school meals could have significant long-term health and socio-economic benefits. The Government’s introduction of a universal offer of FSM for all infants has on average reduced the chances of a child becoming obese by 0.7 percentage points, proving more effective in reducing obesity than policies focussing on food education or physical activity. FSMs have also been linked to improving attention and academic performance of children from low-income backgrounds. 

Impact of rising energy costs

  • While the Government’s Energy Price Guarantee, Energy Bills Support Scheme and Cost of Living Payments will protect some households from further energy price increases this winter, further sustained support will be needed to help residents who already struggling. Even after current Government interventions, the number of households in fuel poverty has risen significantly this year it is forecast to rise even further when the existing interventions end.  
  • The NHS in England already spends £1.3 billion each year treating preventable conditions caused by cold and damp homes. More people living in cold and damp homes will have damaging and significant consequences for public health, contributing to preventable deaths, reduced life expectancy and widening health inequalities.
  • Certain households are more likely to be in fuel poverty, including households with dependent children, households which are home to people living with disabilities and those from ethnic minority backgrounds. Many of these groups are more likely to suffer the worst health impacts of fuel poverty, including the elderly, children and those with chronic illness and disability. With 1 in 5 children already experiencing fuel poverty in 2020, new research outlines how the current cost of living increases will have a significant detrimental impact on the health, education and social prospects of an ever-growing cohort of children.

Long-term solutions to fuel poverty

  • Fuel poverty is driven by three main factors: household income, the cost of energy and the energy efficiency of a home. Alongside measures to support people with rising costs, we also need urgent action to help cut households’ energy consumption and improve the UK’s energy security by moving away from our reliance on fossil fuels, decarbonising heat and insulating homes – with measures focussed on the most vulnerable. 
  • LGA analysis shows that 2 million households in fuel poverty will need additional help to implement energy efficiency measures that lift homes up to Energy Performance Certificate (EPC) rating C by 2030. To meet the Government’s target to retrofit a total of 3.1 million fuel poor homes to EPC C Standard by 2030, almost 900 homes will need to be retrofitted a day. To achieve these targets, there needs to be a step-change in delivering retrofit. 
  • To date the national approach has been too piecemeal and too short-term to deliver the scale of action that is needed, with schemes lacking the right measures to develop the skilled workforce to deliver them. 
  • A mass retrofit programme can only be achieved through the collaboration of national and local government, alongside business and the voluntary sector, which need to come together to develop the skills, materials and investment pipelines at pace. We are calling on Government to work with councils to develop a strategy for retrofit, which gives local government the flexibility and long-term place-based funding to decarbonise buildings, while delivering the necessary skills and employment support to build the skills pipeline.
     

Local housing allowance reform

  • The Local Housing Allowance, which determines the amount of housing benefit private renters can receive, has been frozen since March 2020. LHA no longer covers the cost of renting a modest two or three-bedroom homes in 91 per cent of England, with an average shortfall for a two-bedroom home of £547 a year. The benefit freeze means low-income families have less money for essentials and has left some families and vulnerable people – including single parents and disabled people – struggling to pay their rent and cover other household bills. In the worst cases, the level of LHA is causing homelessness and is preventing people from leaving temporary accommodation. As part of review of welfare policy, we want to see the Department of Work and Pensions (DWP):
    • Re-align Local Housing Allowance rates back to the 30th percentile of local rents and link them with rental inflation going forward, and begin a comprehensive review of LHA rates taking into account the overall Benefit Cap. 
    • Lift the Shared Accommodation Rate restriction for under 35-year-olds, which limits single private renters under the age of 35 to receiving the lower ‘shared accommodation’ rate of LHA, even if they do not share their home with others. 
    • Review housing benefit regulations that exclude service charges from being calculated into the amount of LHA that tenants receive. Including service charges within LHA calculations could help to prevent people from having to leave supported accommodation, because their benefits do not adequately cover additional charges and costs.   
       

Supporting people into quality work

  • Supporting more residents into quality work, and enabling people to progress in work, will be vital to ensuring communities are more financially resilient in the long-term.
  • However, the current skills system is highly fragmented and schemes are too short-term and standalone to make an impact for communities on the ground. Recent analysis by the LGA (April 2021) reveals that across England, around £20 billion is spent on at least 49 nationally contracted or delivered employment and skills related schemes or services, managed by nine Whitehall departments and agencies, and delivered by multiple providers and over different geographies. No single organisation is responsible for coordinating these programmes nationally or locally, meaning there is no accountability over how the totality of provision is improving support for communities.
  • It is positive that the Levelling Up White Paper recognised that Whitehall needs to build ‘place’ into national provision and work more with local government. We want to accelerate these efforts and ensure every area can benefit from a locally-relevant and responsive, integrated skills and employment service sooner than the Government’s ambition of 2030.
  • The LGA’s Work Local model is a ready-made blueprint for making this happen. By giving democratically elected local leaders the power and funding to work with local partners – businesses, training providers, the education system –to join up careers’ advice and guidance, employment, skills, apprenticeships, business support services and outreach in the community, Work Local could drive inclusive economic growth at lower cost. For a typical medium-sized combined authority, a Work Local approach could improve employment and skills outcomes by about 15 per cent, supporting an extra 2,260 people to improve their skills each year, moving an extra 1,650 people into work, boosting the economy by £35 million per year and saving the taxpayer £23 million per year.
  • The Government’s recent skills reforms, such as the introduction of the Lifetime Skills Guarantee and the Lifelong Learning Entitlement have focussed on expanding access to higher level skills at level 3 or above. While this is important, more must be done to support people with low or no qualifications be part of the talent pipeline. They are still nine million adults in England that lack functional literacy and numeracy skills, and thirteen million UK adults not qualified to Level 2 (GCSE or equivalent).
  • However, the Adult Education Budget (AEB), which councils use to fund community learning, has been reduced by half since 2010. In the same timeframe, adult learner numbers have fallen by almost 40 per cent. The LGA have long been calling for AEB funding  as minimum, to be restored to £3 billion  and fully devolved to all local authorities, to allow councils to equip those with the least qualifications with the right support and tools to be move into quality, secure work.
  • The welfare system continues to hold people back from entering training or education, because they will lose out on benefits when starting training. If we are to fulfil the ambition of closing the skills gap, creating a high skill economy and tackling economic inequalities, the DWP needs to prioritise skills and education within its jobs and employment strategy and integrate training into its employment support schemes to strengthen support those who would benefit from upskilling and reskilling.
  • The European Social Fund (ESF) currently co-funds vital national and local employability interventions, including councils’ and Mayoral Combined Authorities local schemes and services. ESF is set to come to an end in 2023 and will be replaced by the UK Shared Prosperity Fund (UKSPF). While we welcome that UKSPF is council-led and awarded through needs-based allocations, it offers no long-term funding certainty. The UKSPF People & Skills priority funding, which can be used for skills and employment provision, is for one year only and cannot be used by councils to invest in provision until 2024-25. This exposes vital council-led skills provision to cuts, redundancies, and reduced services, at a time when those furthest from the labour market are in need of increased support.