The cost-of-living crisis in the United Kingdom (UK) has severely worsened during the Covid era, pushing households into financial hardship and the looming prospect of poverty. According to a recent survey conducted in February 2024 by the Office for National Statistics (ONS), 46 per cent of households reported an increase in their cost of living compared to the previous month. This increase, evidenced by high levels of ongoing inflation, has been confirmed by Statista, a German online statistics organisation, which notes:

‘As of March 2024, 46 per cent of households in Great Britain reported that their cost of living had increased in the previous month … various factors have been driving price rises in Britain, with the inflation rate hitting a high of 11.1 per cent in October 2022.’

The poorest households, which already spend most of their income on essential items such as food and housing, are the hardest hit by the cost-of-living crisis which is, understandably, one of the main concerns of the UK government.

There are many causes for this economic malaise, evidenced by a surge in food prices, which has substantially increased the rate of inflation which currently stands at 4 per cent. These include a shortage of workers, which makes the performance of essential tasks artificially expensive, the energy tribulations caused by Russia’s invasion of Ukraine, and the Covid pandemic which adversely affected the supply chain of goods. According to the Harmonised Index of Consumer Prices (HICP), in January 2024, the UK’s inflation rate of 4 per cent was higher than that of France, Germany, the Eurozone average, and the United States. The monster of ‘inflation’ has been exacerbated by the relatively low level of business investment compared to other G7 countries; this lack of investments may expose the existence of structural impediments.

In March 2024, the Office for Budget Responsibility (OBR) predicted that there would be a slight increase of 0.1 per cent in real household disposable incomes per head in 2024, followed by a higher increase of 1.7 per cent in 2025. However, households in the UK with lower incomes are disproportionally affected by rising prices because they are more susceptible to high food, transport, and energy prices. Inflation increases the prices of goods and services and reduces the purchasing power of people, especially when the nominal wage stays the same.

The parlous situation of low-income households is heightened by the recent decision of the Bank of England to increase interest rates. The cost of borrowing, especially for mortgages, has risen substantially, and approximately 1.6 million households that have fixed-rate mortgages expiring in 2024 will face higher mortgage costs. Moreover, rental prices have also increased in recent years, which could potentially impact household budgets further.

In addition, the UK’s unconditional commitment to the achievement of Net Zero emissions by 2050 has worsened the economic stagnation because the transition to ‘renewables’ is expensive. In this context, an informative article published in The Spectator, that focuses on the impact of Net Zero policies, warns that:

To claim that Net Zero has sparked an industrial boom in Britain. you have to be pretty inventive with the figures. … If we are losing out on investment and job creation, that has less to do with the relaxation of one or two Net Zero targets. Britain, after all leads the world purely in terms of the reduction in territorial carbon emissions, which have halved since 1990. It has rather more to do with the expense and bureaucracy being imposed on businesses in a desperate attempt to reach overly demanding Net Zero targets.

On this view, the UK government’s decision to move to Net Zero by 2050 and its determination to transition to a decarbonised future have undoubtedly exacerbated the cost-of-living crisis. But this view does not appear to have diminished the government’s appetite for pursuing a policy of decarbonisation. Indeed, the UK has adopted a comprehensive set of policies and commitments to facilitate the achievement of the 2050 target. Specifically, the government’s 2021 Net Zero Strategy outlines a series of measures designed to reduce emissions and meet targets up to the sixth carbon budget, covering the period between 2033 and 2037. The 2023 Net Zero Growth Plan builds on these strategies and focuses on the deployment of technologies for the decarbonisation of homes, power, industry, and transportation.

In addition, the United Nations 2030 Agenda, and its associated sustainable development goals (SDGs) – one of which strongly endorses the government’s climate change narrative – are promoted in the UK as appropriate tools suitable to alleviate poverty, protect Planet Earth, and contribute to worldwide prosperity. However, these goals, implemented, sometimes enthusiastically, by many companies, do not meet with general approval. Its critics lament that the implementation of the 2030 Agenda changes the function of companies from institutions established to maximise shareholder profit and offering services to their consumer clients, to social engineering tools. In doing so, these companies have effectively become government agents that implement social engineering policies, which may be hostile to the views and aspirations of their shareholders. More damning is the claim that these policies have accelerated the cost-of-living crisis in the UK by diverting massive amounts of money to the imposition of divisive policies which only support a small minority of the UK population. Using companies as change agents has also effectively obliterated the division between the ‘public’ and ‘private’ spheres of commercial life in the UK.

Ultimately, managing the cost of living and protecting the environment need not be mutually exclusive endeavours. However, different crises – especially the cost-of-living crisis – will continue to occur at unexpected moments. The UK government will need to moderate its commitment to Net Zero emissions and refrain from imposing its divisive social engineering policies on companies if it wants to win the war against inflation and restore a modicum of prosperity to the UK’s population.

To address these challenges, the UK government, adopting targeted anti-inflationary measures, therefore needs to prioritise policies that will encourage business investment, increase the supply of workers, and improve the overall well-being of its population. In taking these steps, the UK might build a more resilient economy that can better withstand future challenges and deliver measurable improvement in the prosperity of its citizens.

Kashan Pirzada is a lecturer of accounting at Birmingham City University. He previously served as an associate professor of accounting at the University Utara Malaysia (UUM) and as an Associate Fellow of the Asian Research Institute for Corporate Governance (ARICG).

Gabriël Moens AM is an Emeritus Professor of Law at the University of Queensland. He also served as Pro Vice Chancellor, Dean and Professor of Law at Murdoch University. He recently published The Unlucky Country, co-authored with Professor Augusto Zimmermann (Locke Press, 2024)