Why Londoners should stop seeing the cost of living crisis as someone else’s problem

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Summer fun may be in full swing but we must prepare now for autumn’s impending financial shockwave, warns cost of living expert Greg Marsh.

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hen a vast UFO, improbably shaped like an Italian bistro, lands on Lord’s cricket pitch during the Ashes in Douglas Adams’s sci-fi classic Hitchhiker’s Guide to the Galaxy, people literally can’t see it. This wasn’t, Adams writes, ‘because it was actually invisible or anything hyper-impossible like that,’ but rather because if people saw it, it would oblige them to do something about it. It was an ‘SEP’ – Somebody Else’s Problem.

In like fashion Londoners are proving wilfully oblivious to the cost of living crisis this summer. With drinks in hand at Wimbledon, or tramping off to Glastonbury or Gatwick, we seem almost determined to ignore the impending catastrophe. SEP? So it seems.

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My firm, nous.cohas been polling a representative panel of UK households for months now and we are consistently finding that households are far more likely to identify this as a problem ‘for households in general’ than they are for their own.

Partly this is because at first it really was somebody else’s problem – or at least not a problem for most middle-class professionals. Coverage of the cost of living crisis, and indeed the Government’s initial response to it, has rightly focussed foremost on the effects on households with the lowest incomes. Four in five of the poorest families will face fuel stress this October, compared with just one in 50 of the richest, Resolution Foundation research has shown.

Part of this is plain old human nature. None of us wants to deal with something today we can put off until tomorrow. Households budget monthly in arrears, which is to say we judge whether we are getting by or not by noting what is left in our accounts at the end of the pay cheque. While we have read that average energy costs will exceed £250 per month by October, until it actually happens to us, it hasn’t happened.

It doesn’t help that like death and taxes, we can do very little about the cost of energy, utilities bills and mortgage interest rates. They aren’t purchases we can really ration, so what’s the use of worrying? Smile, smile, smile.

And part of it is denial about the scale of the problem. Despite months of blanket coverage about the severity of the issue, Nous.co research indicates that nearly two-thirds of households surveyed still believe their costs will only increase by up to £1,000 in the next 12 months.

So just how serious is the cost-of-living crisis for middle-income households? To put it in context, the latest forecasts suggest that a dual-income household earning £80,000 per annum is likely to see its annual living costs rise in real terms between £3,000 and £6,000 over the next 12 months.

It’s worth saying that again. By next summer, a typical London household may need to find an extra £500 per month to maintain its current standards of living.

I’m reminded of the last time in recent memory that Wile E. Coyote ran off the cliff edge. By late January 2020, doctors and epidemiologists who had tracked the rise of the new coronavirus were jumping up and down and shouting. Most of us just didn’t want to listen. And if the doomsayers were right, then the scale of the problem was just so great that confronting it adequately would mean having to make major life changes.

We would all prefer to ignore inconvenient truths for as long as possible. But that’s rarely a good strategy. Unlike global warming or the war in Ukraine, where we can individually do very little, there are actually practical steps we can each take to brace ourselves for what is coming.

We can increase our savings rate. We can reduce discretionary spending. We can defer larger expenditures. We can use the free tools out there to make clear plans and budgets. We can make sure we are tracking the mortgage market month by month, optimizing our subscriptions and bargain-hunting.

Some – the retired accountants among us, to be sure, but also those more adversely affected – are already doing precisely those things.

The rest of us, however, need to open our eyes. There is a spaceship upon the hallowed grounds of Lords. It is hiding in plain sight. And it is nobody’s problem but ours.


Credit: www.standard.co.uk /

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