From Liverpool to London, Inflation Means Tighter Wallets and Colder Homes

LIVERPOOL, England — For the past few weeks Vincent Snowball hasn’t needed to use the weekly food bank that runs out of a church near Liverpool’s city center. But he’s still there each Tuesday, laying out fabric swatches to advertise his upholstering services, and to socialize with the people he grew up with.

Like many people across Britain, Mr. Snowball, 61, has been forced to cut down his already modest expenses to stabilize his finances. Prices are rising at their fastest pace in three decades.

“I go to Tesco and I get a shock,” he said, referring to Britain’s ubiquitous supermarket chain. The prices there are “troubling,” he said. Instead he shops at Aldi, the rapidly growing chain that claims to be the cheapest supermarket in Britain.

Prices are rising steeply in the United States and across Europe, driven by rising energy costs and supply-chain issues triggered by the easing of pandemic rules. But in Britain, there is a fear that sharply escalating heat and electricity bills, combined with food inflation, will push millions more into poverty.

The Bank of England on Thursday lifted interest rates for the second time in two months — moving before the Federal Reserve or the European Central Bank. But policymakers acknowledge there is little they can do about the global factors driving inflation.

Up and down the country, people are turning their heat down or off, switching to cheaper supermarkets, taking fewer car trips, cutting out takeout and restaurant meals, and abandoning plans for vacations.

Thursday brought more painful news when the government’s price cap on energy bills was raised by 54 percent, or about 700 pounds ($953) annually, reflecting high global prices for natural gas. The increase will affect 22 million households beginning in April. That same month, a large rise in National Insurance, a payroll tax that finances the National Health Service, among other things, will also take effect, further shrinking take-home pay.

Although inflation is expected to peak in April, at 7.25 percent, Bank of England economists say household finances will continue to erode: For the next two years, household incomes after inflation and taxes will be less than the year before, the bank said. This will be the third stretch of time in about a decade that real wages have shrunk in Britain.

This period is “somewhat unprecedented because it comes on the back of a very huge Covid shock” and Brexit, said Arnab Bhattacharjee, a professor of economics at Heriot-Watt University in Edinburgh and a researcher at Britain’s National Institute of Economic and Social Research.

Mr. Snowball’s gas bill has risen, after a surge in natural gas prices in Europe late last year, and so he mostly uses it for hot water. Despite living in the northwest of England, he rarely turns the heating on. “I’m very conscious about what I use,” he said.

But there are limits to how much Mr. Snowball can withstand. He receives about £300 ($403) in state support toward his £550 monthly rent and another £213 a month in working tax credits, financial support for people on low incomes. There aren’t any luxuries to cut.

“There’s millions of people like that,” Mr. Snowball said.

Although the British economy has slowly shaken off much of the torpor from the sharp recession brought on by the coronavirus, millions aren’t enjoying the recovery. Since the start of the pandemic, the number of people receiving Universal Credit, the main government income benefit, doubled to six million. Since the peak nearly 11 months ago, it has fallen only to 5.8 million. The number of people using food banks also jumped, according to the Trussell Trust, a nonprofit that provides emergency food packages, and independent groups.

A cost-of-living crunch was forewarned last fall but “what came as a surprise this time round was the degree of food price inflation,” Mr. Bhattacharjee said. “This has not happened in the past decade.” In December alone, food and nonalcoholic drink prices rose 1.3 percent, the fastest monthly pace since 2011.

For more and more people, it’s impossible to ignore. Katie Jones’s main food shopping trip, which she does twice a month, used to cost up to £80; now it’s more likely to be £100. Ms. Jones, 33, works full time in Liverpool city center at a branch of a national coffee shop chain. She lives across the River Mersey with her partner and their three children where, in December, the energy bills increased from £95 a month to £140.

“We no longer have takeaways in the house,” she said. “Partly it was for health reasons, but I also noticed just how much it costs.” And there are fewer date nights with her partner because she can’t push the cost of them out of her head.

Food inflation is hurting those who are trying to help. Managers of the Earlsfield Foodbank in southwest London recently decided cut items from their offering — including juice, snacks, cheese and peanut butter — because they are too expensive now. And they will provide fewer toiletries and household items, such as laundry detergent.

Each week, the food bank buys a wide variety of fresh vegetables and fruit, and other food, to supplement its donations. In the past few weeks, the cost of supplies has increased worryingly.

“That number is going up and isn’t really sustainable throughout the year,” said Charlotte White, the manager.

As the cost of purchases rises, so does the list of people seeking help. Last week, eight more people registered with Earlsfield Foodbank, and 71 people received food parcels. In March 2020, they were averaging 25 guests a week, with fewer families and working people.

“Families are already at, if not beyond, breaking point,” said Ruth Patrick of the University of York and the lead academic of Covid Realities, a national project in which about 150 low-income parents and care-providers have documented their experiences through the pandemic. “We get a really dominant message coming through about fear and anxiety and worry about how people will get by.”

Through the project, Joanne Barker-Marsh, 49, has found some emotional, and at times financial, support. She lives in a two-bedroom house on the outskirts of Manchester with her 12-year-old son Harry, and worries that, with its high ceilings and uncarpeted floors, it is too cold.

“Probably, I was quite comfortable last year,” she said. “Now there is no buffer, there’s nothing. About October time last year was the first time I thought to myself, ‘Oh my God, actually this doesn’t look as good, there’s nowhere I can go.’”

That month, the government’s £20-a-week increase for Universal Credit recipients ended, a pandemic-era benefit she’d been receiving since losing her part-time cleaning job in 2020. Recently, her bills from British Gas went up by about £20 a month, to £90. She’d already taken advantage of a payment holiday on her mortgage, she said.

Despite being financially strained for years, Ms. Barker-Marsh said she’s now having to consider even more drastic changes. Namely, selling her house. “I just don’t have a choice,” she said. She’s looking to move into something even smaller and easier to heat. “The only asset I’ve got in the world is this house.”

While food costs are rising and gasoline prices recently hit a record high, energy bills are the biggest concern for many people.

And the problem will get worse in April when the price cap rises, though the government is trying to soften the blow. The Treasury has said it would give households up to £350 off their bills this year in the form of loans and tax rebates, representing about half of the increase in the price cap.

A few weeks ago, Thomas Tonchev-Williams, a 33-year-old graduate student, got an unwelcome surprise. Each month he pays a flat rate of £33.80 for gas, an estimated average for heating his one-bedroom apartment in central London over the course of a year. It’s part of an old house with high ceilings, no insulation, and only half the rooms have double-glazed windows. The first two bills said he was using about £16 less gas than he was paying for. The next bill said he’d gone over by £130. That higher charge and future ones will either push his monthly rate higher or leave him indebted to his supplier.

“Even though I’ve been spending less time at home than at the height of Covid, my energy bills have never been higher,” Mr. Tonchev-Williams said.

Now, he tightly restricts the heat to one hour in the morning and four in the early evening. Rather than turning it up later at night, he’s put a second duvet on the bed.

Some people don’t know how to cut back further. In the church in Liverpool, Christine Owens, 61, has already switched energy suppliers to access a government-funded discount program. But then a couple of weeks ago, the new supplier, EDF, started sending her letters saying her twice-monthly flat-rate payment of £35 wasn’t covering enough of her fuel usage — she owes £1,000.

“It’s a struggle trying to put it up more,” Ms. Owens said of her payments.