The Effects Of Poverty And The Cost-of-Living Crisis, and What Governments and Businesses Can Do About It

Article written by Nisha Rikhi, BA in Politics and International Relations from University of Sussex, GDL graduate, and current LPC student.

The cost-of-living crisis has had a profound effect on many families and businesses across the country. The rising costs of essentials, inflation and the rising base rate have all created the perfect storm in which many have begun to struggle. The government should be concerned because this affects all facets of life. In this article, I will be looking at some of the most important aspects of this crisis: housing, food, childcare, child poverty, and commuting to work.

Housing

Housing is a real issue in this country. We know there has been a housing crisis for many years, but the cost-of-living crisis has made this much worse. The rising base rate has meant that many are now struggling to pay their mortgages and landlords have been forced to increase rents to cover their own costs. This has resulted in a rise in homelessness and an increase in housing poverty as people have either been forced to give up their homes or take up cheaper housing that is in poor condition. The government should be concerned because of the rise in sickness caused by poor housing, which results in people not being in work. This is often because people who cannot afford to own their own homes are forced to rent, and many are living in substandard accommodation riddled with disrepair. Government should be seeking to eradicate housing poverty. Government could do this by cutting stamp duty and income tax, which would reduce poverty as it would allow people to keep more of their money while at the same time make home ownership more affordable. Government could also take the initiative and build affordable social housing on brownfield sites owned by the government for people who cannot afford mortgages or private renting.

The rising costs of essentials

The rising costs of essentials is taking a terrible toll on families and individuals. The rising cost of food is resulting in people, who have not struggled before, struggle to afford food. The rise in food prices has seen foodbank usage soar as more and more families and individuals are going to charities to source food because they cannot afford to buy it themselves. Food banks are now feeding a large proportion of the population who simply do not have the funds to feed themselves. Government should be concerned that people are relying on charities to feed themselves and their children. Eradicating food poverty should be top of the government’s agenda. Government could start to do this by cutting the VAT charges on purchases of essential foodstuffs to make the cost of the average food shop cheaper. In addition to this, government could legislate to ensure that more of the fruit, vegetables, dairy products and meat sold in supermarkets is produced in Britain, which would make our food shopping cheaper as supermarkets would not have to pass on the costs of import taxes and excise duties to the consumer. It is clear that there are actions the government can take to mitigate the rising costs of essentials.

Child poverty

Children are the ones we should be concerned about the most. This is because the life chances of a child is often determined by their experience at school. The children from the poorest backgrounds have the lowest attainment at GCSE and are often excluded from school, which affects higher education pathways available to them. Compounding this is the fact that some children are unable to access education or training due to the cost of commuting to and from college, particularly if they live in rural areas with poor public transport. The government should be seeking to reduce child poverty as the circumstances in which children live often affect their health in the long term. This is because tooth decay and obesity are more prevalent issues in children from poorer families. The government could mitigate the adverse effects of poverty on health by taxing manufacturers of junk food which would result in the price of these products being raised or the recipes being reformulated to reduce the sugar content. Alternatively, the government could ban adverts of junk food on television which could reduce the demand for these products among consumers. The government could also seek to eradicate the educational effects of poverty by funding extra places in Pupil Referral Units for the most disruptive students who cannot be in mainstream school. Government could also create bursaries so the poorest children could access vocational or technical qualifications. Evidently, it is clear that there are constructive ideas the government could act on to improve the health and educational outcomes resulting from poverty.

The costs of childcare and commuting

The cost of childcare in this country can make working a real challenge for many mothers. Childcare is very expensive, and it can eat up a sizeable chunk of a family’s income if they have to work full-time. For some mothers, the cost of childcare makes working unviable. This means that there is a sizeable cohort of people who could be working and are simply not able to do so, resulting in rising job vacancies and less productivity. The result is that for women, they face a loss of earnings as they are not able to attract higher salaries due to childcare commitments that mean they need to be able to work flexibly. Furthermore, businesses face a loss of talent as female employees seek work elsewhere that they can fit around their childcare needs. The cost of commuting to and from work has also become a real struggle for many employees and workers. Rising train fares and the rising cost of parking cars has meant that workers face additional costs on transportation to and from work. The costs of commuting are so high that some workers have been forced to leave their job and seek work closer to home to reduce costs. This has a detrimental effect on businesses and the communities in which they work. If people cannot afford to travel to their workplace and seek work local to them or jobs in which they can work from home, then businesses will lose talent and struggle to recruit workers. The communities in which businesses are based will lose valuable income and business from workers who use the community’s facilities and local shops. Therefore, it is clear that childcare and the cost of commuting are issues greatly affected by the cost-of-living crisis.

How employers could help

Employers should therefore be offering support to employees during the cost-of-living crisis. By paying employees at least the national minimum wage, employers are ensuring that employees are being paid fairly for their work which also ensures that employees do not fall further into financial hardship. Furthermore, employers could offer employees greater flexible working options to ensure that those struggling with the cost of commuting and those with caring responsibilities are able to remain in work. Alternatively, employers could offer employees 5 days of paid carer’s leave and 10 days of paid parental leave to give employees a buffer should emergencies arrive with childcare or other caring arrangements. This would ensure that parents and carers could take time off work in an emergency without sacrificing pay or worrying about losing their jobs. Clearly, there are practical things that employers can do to manifestly help employees struggling with the cost-of-living crisis.

How government could support employers

However, if government wants businesses to support employees and pay higher wages, then government will need to act to support businesses. Small businesses are the engine of the British economy and the majority of employers in the UK are small business owners. Inflation, the rising costs of essentials and the increased base rate has made already difficult conditions much worse for small businesses. Therefore, it is in the government’s interests to make sure they create an environment in which small businesses can thrive. In a time when businesses are facing rising costs and seeing a fall in customers coming through the door, taxes have become a burden that makes owning a small business unviable. Government could help small business owners by cutting the amount of VAT that all small businesses pay and reducing the amount of tax all small business owners pay on dividends. This would ensure that both the business and the owners benefit as the owners could reinvest the VAT savings in the business while seeing a greater profit from lower taxation on their dividends. Furthermore, government could cut business rates for all small businesses, which would allow small business owners to make greater investment in staffing, particularly, staff training, for example. Allowing small businesses to keep and reinvest more of their earnings will benefit the economy in the long run. This is because they will be able to keep their staff instead of having to reduce hours or make staff redundant to cut costs and they will be able to reinvest the money to increase the earnings the business makes. By cutting taxes on small businesses, government will make it easier for these businesses to thrive and therefore enable employers to employ more staff and better support the staff they already have, which can only be beneficial in a cost-of-living crisis.

There will always be people who are richer or poorer than others, however, it is abhorrent that food poverty and child poverty exist in this country. It is also appalling that the housing options available to people and the health outcomes of individuals is driven in part by their socio-economic background. Therefore, the government should be using our taxes solely to invest in education, the National Health Service, and other public services to ensure that nobody falls into poverty in this country.