The UK Cost of Living Crisis in Numbers: Inflation, Energy Bills and Food Banks

The Scale of the Crisis

The phrase "cost of living crisis" entered everyday British usage in 2022, but the pressures it describes had been building since late 2021. What began as supply-chain disruption following the COVID-19 pandemic escalated sharply following Russia's invasion of Ukraine in February 2022, which sent energy and food commodity prices soaring across Europe.

The result was an inflation shock unlike anything the UK had experienced since the early 1980s. The Consumer Price Index — the ONS's headline measure of household inflation — rose from 2.1% in May 2021 to 11.1% in October 2022. At that peak, the typical UK household faced price increases equivalent to more than £100 per month above what they would have paid twelve months earlier.

Unlike the inflation of the 1970s and early 1980s, which was driven significantly by wage-price spirals, this episode was initially supply-led: fuel, energy and food commodity prices spiked first, and the squeeze fell disproportionately on lower-income households who spend a larger share of their budget on necessities. For millions of families — particularly those without savings, in insecure work, or dependent on fixed incomes — the mathematics of survival changed significantly over a very short period.

The crisis was not evenly distributed. Analysis by the Resolution Foundation and the Institute for Fiscal Studies consistently found that the poorest tenth of households faced effective inflation rates several percentage points higher than the headline CPI figure, because they spent proportionally more on energy, food and other necessities where prices rose fastest. Wealthier households, with more discretionary spending on services and luxuries where inflation was milder, experienced significantly lower effective rates.

The Inflation Timeline: From Recovery to Shock

The Build-Up (2021)

Inflation had been subdued for most of the 2010s, consistently running below the Bank of England's 2% target. During the COVID-19 pandemic, it briefly dipped below 1% as consumer spending collapsed. The recovery, when it came, was faster than anticipated — supply chains that had wound down could not be restarted quickly, and demand surged as the economy reopened.

By the end of 2021, CPI was running at around 5% — already above the Bank of England's 2% target, and the highest it had been for a decade. The Bank began raising interest rates in December 2021, the first increase since 2018.

The Ukraine Shock (2022)

Russia's invasion of Ukraine in February 2022 transformed an already difficult situation into a full crisis. Ukraine and Russia together account for a significant share of global wheat, sunflower oil and fertiliser exports. The conflict disrupted supplies immediately and pushed commodity prices to multi-year highs. Simultaneously, European energy markets — heavily dependent on Russian gas — went into near-panic. UK wholesale gas prices, which had already risen substantially, spiked to extraordinary levels in late 2021 and remained elevated throughout 2022.

The Ofgem energy price cap, which limits the unit rate energy suppliers can charge households on default tariffs, was raised from £1,277 in October 2021 to £1,971 in April 2022, and then to £3,549 from October 2022 — though this figure was overridden by the government's Energy Price Guarantee, which capped the typical bill at £2,500 per year for the six months from October 2022.

The Slow Descent (2023–2024)

Inflation began falling from late 2022 as energy commodity prices retreated from their peaks and the Bank of England's rate rises began to bite. However, the descent was slower than hoped — particularly for food prices, which continued rising at double-digit rates into 2023. Services inflation also proved sticky, partly reflecting wage growth as employers tried to retain staff in a tight labour market.

CPI did not return to the Bank of England's 2% target until June 2024 — nearly three years after the crisis began. By that point, however, the cumulative level of prices was approximately 20–25% higher than in 2020. Inflation returning to 2% does not mean prices fall; it means they stop rising as fast. The higher price level becomes the new baseline.

Energy Bills: The Biggest Shock

Of all the components of the cost of living crisis, rising energy bills had the most immediate and visible impact on household budgets. The UK's energy market operates through a system of Ofgem price caps that set the maximum unit rates energy suppliers can charge. Until 2021, the price cap had changed relatively little — the typical household energy bill had been broadly stable for several years at around £1,000–1,100 per year.

The Price Cap Rollercoaster

From October 2021, when the crisis began to bite, the price cap began rising rapidly in response to unprecedented wholesale gas prices. For the first time, there was genuine public concern that the cap could rise to levels that would make household energy unaffordable for a large portion of the population.

The Energy Price Guarantee

In September 2022, the government announced the Energy Price Guarantee (EPG) — a policy that overrode the Ofgem cap and capped the typical household energy bill at £2,500 per year from October 2022, rather than the £3,549 Ofgem cap that would otherwise have applied. The EPG was subsequently extended and modified several times before being wound down as wholesale prices fell.

The total cost of the EPG to the public finances was approximately £37 billion — one of the largest single peacetime fiscal interventions in UK history. Analysts at the National Audit Office noted that while the scheme was implemented rapidly and did prevent widespread fuel poverty, its universal design meant that wealthier households with higher energy consumption received proportionally more support than lower-income households in smaller properties.

A separate Cost of Living Payment, paid automatically to households on qualifying means-tested benefits, provided £650 in 2022/23 and £900 in 2023/24 to approximately 8 million families. A Pensioner Cost of Living Payment added a further £150–300 for those on Pension Credit or the Winter Fuel Payment.

Standing Charges

One aspect of energy bills that attracted particular criticism was the rise in standing charges — the fixed daily amount households pay regardless of how much energy they use. Standing charges for electricity rose from around 25p per day in 2021 to over 60p per day by 2023. Critics argued this structure penalised low-income households, who may have cut consumption aggressively but could not avoid the fixed daily charge, while rewarding high-usage households who could spread the standing charge across a larger bill. The Competition and Markets Authority launched a review of standing charges in 2024.

Food Prices: The Supermarket Squeeze

After energy, food was the component of the cost of living crisis that attracted most attention — partly because of its visibility (rising shelf prices are encountered at least weekly), and partly because of the stark images of record food bank queues that accompanied the statistical data.

ONS Food Price Inflation

ONS data shows that food and non-alcoholic drink prices, which had barely moved during the 2010s, began rising in mid-2021 and accelerated rapidly into 2022. Food price inflation peaked at 19.2% in March 2023 — meaning that the typical food shop cost nearly a fifth more than it had twelve months earlier.

The drivers were multiple and interacting: higher energy costs increased the cost of food production, processing and refrigerated transport; higher fertiliser prices (partly caused by Russian export restrictions) raised the cost of growing crops; and the post-Brexit trade friction, while difficult to disaggregate precisely, added to the cost and complexity of importing fresh produce from the EU.

Shrinkflation

Price rises on the shelf told only part of the story. ONS research documented widespread "shrinkflation" — the practice of reducing the size or weight of a product while keeping the price the same or similar. Products ranging from chocolate bars and crisp packets to toilet rolls and laundry detergent were affected. The ONS found that in 2022 and 2023, the number of consumer products that had reduced in size was running at several times the historic average, effectively delivering hidden price increases that the CPI headline rate did not fully capture.

Own-Brand and Discount Retailers

Consumer behaviour shifted substantially during the crisis. Market research firm Kantar documented consistent growth in own-brand products at the expense of branded goods, and record market share gains by the discount grocers Aldi and Lidl. By 2023, Aldi had overtaken Morrisons to become the UK's fourth-largest grocery retailer by market share — a remarkable achievement for a chain that was considered a niche operator a decade earlier. The shift accelerated as consumers discovered that own-brand and discount-retailer equivalents could replicate the quality of branded goods at significantly lower prices, with many switching permanently.

Food Banks: A Record-Breaking Crisis

Food bank use in the UK had been growing steadily since 2010, driven by welfare reforms, benefit delays, stagnant wages and rising housing costs. The cost of living crisis supercharged this trend to an extent that shocked even food bank organisations themselves.

Trussell Trust Data

The Trussell Trust — the UK's largest food bank network, operating over 1,300 food bank centres — publishes annual data on emergency food parcel distributions. The scale of increase over the past decade illustrates the underlying structural trend, but the acceleration from 2021 onwards stands out sharply:

The 3.12 million parcels distributed in 2023/24 represent more than a three-fold increase compared to 2013/14. Approximately 1.1 million of these parcels went to children. The Trussell Trust noted that the drivers of referrals had shifted: while benefit delays and sanctions had historically been the primary reasons for food bank visits, low income — where people were in work or receiving benefits but simply did not have enough money to cover both food and other essential costs — had become the leading referral reason by 2023.

Beyond the Trussell Trust

The Trussell Trust network, large as it is, represents only a portion of the UK's food aid infrastructure. The Independent Food Aid Network (IFAN), which coordinates non-Trussell food banks and pantries, estimated in 2023 that total food aid provision across all networks was considerably higher — potentially reaching 8 million instances of food aid support per year when pantries, community fridges and other formats were included alongside traditional food banks. Precise national data on the full scope of food aid is difficult to compile because many smaller operations do not report systematically.

Wages vs Inflation: The Real Pay Squeeze

One of the defining features of the cost of living crisis was the sustained collapse in real wages — earnings adjusted to account for inflation. Even in periods of nominal wage growth (where headline pay settlements were above historic norms), inflation consistently outpaced pay rises, leaving workers worse off in real terms.

Two Years of Real Pay Cuts

According to ONS Average Weekly Earnings data, real regular pay (total pay excluding bonuses, adjusted for CPI) fell for approximately 22 consecutive months between July 2021 and April 2023. At the nadir of the squeeze (mid-2022), real regular pay was falling at an annual rate of more than 3%. For an average earner on approximately £35,000, this represented a real-terms income loss of over £1,000 per year.

The experience varied significantly by sector. Public sector workers, whose pay is often set through multi-year agreements or subject to government pay review body recommendations, initially received pay rises well below inflation. This led to significant industrial action across the NHS, the civil service, schools and rail, with unions arguing that real-terms pay cuts were unacceptable given the financial pressure their members already faced.

The National Living Wage

One partial cushion was the National Living Wage (NLW), which the government raised by above-inflation amounts during the crisis period. The NLW increased from £8.91 per hour in April 2021 to £11.44 per hour in April 2024 — an increase of approximately 28% over three years. For full-time workers at the bottom of the pay scale, this substantially exceeded inflation and provided meaningful protection.

However, approximately 30% of UK employees earn above the NLW but in the bottom half of the wage distribution — a group that benefited less directly from NLW increases, and who faced significant real-terms pay cuts as their employers' wage settlements lagged behind inflation.

Savings Rates and Debt

The combination of rising prices and falling real wages forced many households to draw down savings or increase borrowing. The ONS household saving ratio — the proportion of disposable income saved — fell from an elevated post-pandemic level of around 9% in early 2022 to approximately 4–5% by late 2023, as households spent accumulated pandemic savings to maintain living standards. Use of consumer credit, including Buy Now Pay Later schemes and credit card borrowing, rose materially, with the Bank of England's Financial Policy Committee noting elevated debt-servicing pressures among lower-income borrowers.

Housing Costs: A Compounding Pressure

Soaring energy and food costs hit households against a backdrop of already high and rising housing costs — a long-standing affordability problem that the cost of living crisis made significantly worse for millions of renters and mortgage holders.

Mortgage Rates and the Interest Rate Rise

The Bank of England raised interest rates fourteen consecutive times between December 2021 and August 2023, from a historic low of 0.1% to 5.25%. This was the sharpest and most sustained rate-raising cycle in over three decades. For homeowners on tracker or variable-rate mortgages, monthly payments rose immediately. For those on fixed-rate deals, the impact was deferred — but many faced a severe "mortgage cliff edge" when their fixed terms expired and they were forced to remortgage at rates several times higher than their previous deal.

By mid-2023, the average two-year fixed mortgage rate had risen to approximately 6.8% — compared with around 2–2.5% two years earlier. For a household with a £200,000 mortgage, this represented an increase in monthly payments of approximately £600–700. The Resolution Foundation estimated that by 2024, around 1.6 million households would have seen their mortgage payments increase by more than £200 per month as their fixed deals expired.

Private Rents

For the approximately 4.6 million households in the private rented sector, the cost of living crisis brought a separate and severe housing affordability squeeze. Private rents, which had been broadly stable or moderately increasing during the pandemic, began rising sharply in 2022 as demand — partly from people moving out of the family home during the recovery, partly from people unable to buy — outstripped a constrained supply of properties.

ONS private rents data shows annual rent increases running at 8–9% during 2023 — the highest rate since records began. In London, the average new let asking rent exceeded £2,500 per month by mid-2023. Renters, unlike homeowners, had access to no government scheme comparable to the Energy Price Guarantee. Those facing large rent increases at the same time as high energy and food costs had the fewest options: renters cannot reduce their housing costs by switching tariff, and moving home itself incurs significant costs.

Social Housing and the Benefit Cap

Social housing tenants — approximately 4 million households — faced rent increases of up to 7% in April 2023, following a government decision to allow social landlords to raise rents by up to 7% to support the sector's finances. For social housing tenants on housing benefit, the interaction with the Local Housing Allowance (LHA) — which had been frozen for several years — meant that housing benefit frequently covered a smaller share of actual rent costs than it was designed to. The government unfroze the LHA in April 2024, resetting it to the 30th percentile of local private rents, providing modest relief.

The Government's Response

The cost of living crisis prompted one of the largest peacetime emergency fiscal responses in UK history, with successive Conservative governments (under Boris Johnson, Liz Truss and Rishi Sunak) and the incoming Labour government of Sir Keir Starmer all implementing support measures.

Key Support Measures (2022–2024)

• Energy Price Guarantee (Oct 2022 – Jun 2023): Capped the typical household energy bill at £2,500 per year (rising to £3,000 from April 2023). Total cost: approximately £37 billion.
• Energy Bills Support Scheme: £400 non-repayable discount applied to all household energy bills in six monthly instalments from October 2022 to March 2023.
• Cost of Living Payments: £650 in 2022/23 and £900 in 2023/24 for approximately 8 million households on means-tested benefits (Universal Credit, Tax Credits, Pension Credit).
• Disability Cost of Living Payment: £150 additional payment to approximately 6 million individuals on qualifying disability benefits.
• Pensioner Cost of Living Payment: £150–300 for pensioner households in addition to the standard Winter Fuel Payment.
• Household Support Fund: Devolved to local authorities to provide discretionary support for essential costs including food, energy and clothing. Several rounds totalling approximately £2.5 billion.
• National Living Wage increases: The NLW rose from £9.50 in April 2022 to £10.42 in April 2023 and £11.44 in April 2024, the largest percentage increases in the policy's history.
• LHA unfreeze (April 2024): Local Housing Allowance reset to 30th percentile of local rents for the first time since 2020, providing targeted support to private renters on housing benefit.

Criticism and Gaps

Despite the scale of intervention, critics argued that the support was often poorly targeted, arrived too slowly, or failed to reach those who needed it most. The Energy Price Guarantee was available to all households regardless of income, meaning wealthier households with higher energy consumption received more support in absolute terms. The £400 energy rebate was universal, with no means-testing. Some of the most financially vulnerable households — those in arrears, on pre-payment meters, or in informal tenancy arrangements — faced additional barriers to accessing support.

The withdrawal of the Winter Fuel Payment from non-Pension Credit recipients by the Labour government in 2024 — affecting approximately 10 million pensioner households — was one of its most controversial early decisions, attracting criticism that it reversed support precisely as energy bills remained elevated above pre-crisis levels.

Where Things Stand: Legacy and Outlook

By 2025–26, the acute phase of the cost of living crisis had passed. CPI inflation had returned to around 2–3%. Energy bills, while higher than before 2021, had retreated substantially from their 2022 peaks. Real wages were growing again, and the Bank of England had begun cautiously cutting interest rates.

Yet several indicators suggested the crisis had left lasting damage:

• Cumulative price level: Even with inflation back near target, the price level remained approximately 20–25% higher than in 2020. Households had not experienced prices returning to pre-crisis levels — only a slower rate of increase.
• Food bank use: Despite slightly reduced acute financial pressure, Trussell Trust distributions remained at historically elevated levels. The structural factors driving food bank use — inadequate benefit levels, insecure employment, insufficient housing benefit — had not been resolved.
• Household debt: Consumer credit, particularly credit card debt, had grown materially during the crisis, and debt-servicing costs remained elevated even as the headline Bank Rate fell.
• Savings depletion: Many lower-income households had spent their pandemic savings buffer and faced the risk of future shocks with less financial resilience.
• Mental health: Financial stress — chronically elevated through the crisis — had measurable consequences for mental health, with NHS England reporting increases in anxiety and depression presentations that researchers partly attributed to financial strain.

The UK's experience was not unique — similar inflation shocks affected most of Europe and North America, with Germany, Italy and Spain all seeing CPI rates well above their historic norms. But the UK's particular combination of high energy import dependency, post-Brexit trade friction, and low productivity growth made it one of the harder-hit major economies in the peer group, with the OECD noting in 2023 that the UK was the only G7 economy experiencing double-digit inflation.

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