The cost of living squeeze: insights from the Bank of England’s outreach programmes

The Bank of England listens directly to people from all parts of the UK. This report is a summary of what we learnt over the past 12 months and how we used those insights.

Financial insecurity has become more widespread

People have changed behaviours as costs have risen

Charities are in demand and under pressure

Published on 01 March 2023

The Bank of England runs an extensive outreach programme throughout the year. This programme provides a way for members of the public to share their experiences of the economy and hold the Bank to account for the decisions it has taken.

This report provides a summary of the discussions that took place from February 2022 to February 2023. It focuses on the impact of higher inflation, and people’s responses to it.

The report includes information gathered at citizens’ forum sessions, including in-person panels for people living in specific regions and nations and UK-wide virtual events. It also draws on research undertaken by the Bank’s youth forum, and intelligence gathered from community forum events run in partnership with a range of charities and community groups.

It has been compiled on behalf of the chairs of the citizens’ forum panels who play an important role in the delivery of these outreach events for the Bank.

Introduction from the panel chairs

We are volunteers who help the Bank of England to have direct conversations with people from all parts of the UK. We do it because we believe the work the Bank does to listen to people’s views and experiences is vital.

This report is a summary of those conversations and the impact they had.

Some of the main ways these conversations take place are through the Bank of England’s:

  • citizens’ forum (including regional panel events and online Economy Hub)
  • community forums
  • youth forum

We are the independent chairs of the 12 panels covering the UK’s regions and nations that make up the citizens’ forum. This forum has around 4,000 members. Our role is to make sure everyone who takes part in the panel meetings has their voice heard.

There are also community forum events for charities and the people they support. And a youth forum that is specifically for people who are aged 16 to 25.

This report covers the period from February 2022 to February 2023. Over the year, many people used these forums to share their experiences about the sharp rise in the cost of living and the impact it had on them.

Many of the issues we see in our own work in local communities are reflected in this report. Many of us are deeply involved with charities or community groups that are grappling with the challenges caused by high inflation. We know first-hand the difficulties people face.

One of the ways the Bank uses the information it gathers at the forums is to track how sentiment changes over time. This is particularly helpful at times of high economic uncertainty when the other data it uses (including key economic indicators) are more volatile or less reliable than usual. They are often also less timely.

In this report, you’ll see how the information gathered at these events is used to inform the important policy decisions the Bank of England makes.

We thank all the citizens’ forum members and those who have participated in outreach events and shared their views and experiences so openly.

We also thank them for constructively challenging the people who make decisions that affect everyone in the UK.

We look forward to having more conversations in the year ahead.

Summary of discussion themes

The cost of living squeeze has affected everyone. But the impact has not been felt equally. Some people have been able to manage the effects of rising prices more easily than others.

In the early part of 2022, most of the people who took part in our forums were mainly concerned about the impact of rising inflation on those on lower incomes. For the more comfortably off, personal finances were less of a worry. Energy bills were rising following Russia’s invasion of Ukraine and the cost of the weekly shop was going up. But it felt manageable. Especially for those who had been able to build up savings during the pandemic.

As the year progressed, the picture began to change. A broader range of people told us how they were feeling the effects of higher inflation and had changed their spending habits. Some were cancelling subscription services, eating out less, or delaying (or even cancelling) big spending decisions. Many switched grocery brands to value ranges or other cheaper alternatives. Almost everyone said they were trying to keep energy costs down by, for example, not turning on the central heating for as long as possible.

Panel members who were on lower incomes said their already precarious financial situation was made worse by higher inflation.

People told us they were struggling to afford essentials such as food, energy, fuel, and housing. Those on low or fixed incomes such as Universal Credit or state pensions were particularly badly affected. As were people with healthcare issues, disabilities, and caring responsibilities.

These trends were confirmed by charities and community groups at our community forum events. Many organisations providing services such as food and debt advice saw a big rise in demand. They also saw the profile of their service users change. For example, they began to include more people who were in employment.

Footnotes

  • A member of the North West panel of our citizens’ forum at a meeting in Liverpool.

People often had to make difficult choices. For those unable to work from home because of the nature of their jobs, rising transport costs made decisions about whether to work or not more finely balanced. Some had decided to stop work, or to work fewer days. In contrast, others were working longer hours or taking second or third jobs to cover rising costs. Charities told us they were finding it hard to hold on to staff who could find easier work elsewhere for higher pay.

We heard concerns about the intergenerational effects of inflation. For example, older members felt an impact on their private pensions. Rising costs eroded their savings, leaving them to reduce the amount they drawback, or delay their retirement plans. Some had returned to work to bolster their incomes. That was made easier because of the high level of vacancies in some areas, although there were often complaints about the quality of work on offer, and rates of pay.

At the other end of the age spectrum, research by the youth forum and student attendees at panel events revealed the pressures on young people. More than half of those surveyed by the forum worried about their current earnings and future income prospects. Students, meanwhile, told us their loans were increasingly stretched even to cover just the basics. Some were taking on additional jobs or hours to supplement their incomes. Others were considering whether they could afford to continue their studies.

Footnotes

  • Students share their experiences of the cost of living crisis at a citizens’ forum event at Leeds Trinity University.

Rising inflation led the Bank of England to raise interest rates throughout the year. The people we spoke to generally understood why raising rates would help to bring inflation down. But some questioned whether it would work given the main causes of inflation were higher energy prices and supply problems principally caused by Covid restrictions.

There was concern that households with mortgages would not be able to cope with rising interest rates. These worries increased significantly in the periods following the Government’s fiscal announcement in September 2022 and the reaction to it. This was especially the case for those approaching the end of fixed-term deals, which had often been set at very low rates.

Many attendees at citizens’ forum events wondered how younger mortgage holders who had not experienced rates at such levels before would be able to cope. And there were also concerns for the prospects of those hoping to get on the housing ladder for the first time. Unsurprisingly, the possibility of homeownership felt remote for many young people. In contrast, some older members had been able to pay off mortgages more quickly after building up savings during the pandemic. These people often felt relieved, or even lucky, but had sympathy for younger attendees, especially those not able to count on the support of the ‘bank of mum and dad’.

Those living in rented accommodation did not feel immune from the rises in interest rates. Many worried that rents would rise further as landlords faced higher mortgage servicing costs, or that their homes could be put up for sale if landlords decided to exit the buy-to-let market as it became less profitable.

As the year progressed, more participants were experiencing an income squeeze as prices continued to rise, and fixed-price energy deals expired. There was a general sense that people felt unable to control rising costs through their own actions. And this was increasing concerns about the future if prices of essentials such as fuel, food and housing costs continued to rise.

The rising cost of living has heightened members’ awareness of the state of the economy. Participants understood that the main drivers of inflation were higher energy prices resulting from Russia’s invasion of Ukraine and supply issues linked to Covid. But they also felt that Brexit had been a factor, along with businesses taking advantage of the inflationary environment to increase profit margins.

Footnotes

  • The Bank’s Deputy Agent for Central Southern England Florence Hubert, right, talks to a citizens’ forum member at a panel event in Southampton.

They were very interested in what the Bank was doing to tackle rising inflation. Some people questioned the Bank’s earlier decisions, including on quantitative easing, which some felt might have contributed to rising inflation. Some members felt that interest rates had been kept too low for too long over a prolonged period since the global financial crisis of 2007–09. Others argued that the Bank should have acted sooner in the last couple of years when evidence was increasing that inflation was rising. Generally, however, people understood why the Bank took the actions it had. People recognised that low and stable inflation is vital for a healthy economy. And how high inflation can be particularly damaging if it becomes embedded and persists for a long time. In total, since December 2021, interest rates have risen from 0.1% to 4%. The Bank recognises that higher interest rates have a real impact on people’s lives. But raising interest rates will help to bring inflation down sooner, and make sure it stays low after that.

Impact of the rising cost of living on charities and community groups

Charities and community groups have been especially hard hit by the sharp rise in the cost of living. Many experienced an increased demand for their services. At the same time, their organisations faced rising costs. The combination of higher energy bills and pressure on staff costs has been so acute that some organisations told us they were fearful about their long-term future.

These organisations often provide lifeline services to the most vulnerable people in society. Over the past year the Bank met frequently with organisations across the UK providing services to those experiencing hunger, homelessness, unemployment, debt problems, mental health problems, and a variety of other challenges.

Footnotes

  • David Roberts, Chair of Court of the Bank of England, talks to staff, volunteers and service users at the New Beginnings, Improving Lives community food store on Merseyside.

Many of these organisations relied on local authority funding and some had faced funding cuts. It became harder to raise donations as donors tightened their belts. And with more people working from home, raising funds this way became harder because workers were less likely to get together to raise money for charity. And there were fewer people in town and city centres to approach for support.

How we used the information we gathered

The information gathered from our outreach events directly feeds into policymakers. They use this information to inform the decisions they take on key policies such as setting interest rates.

Policymakers often attend events to hear these insights for themselves. Other Bank of England staff attending events share their reports and notes with teams around the Bank working in relevant policy areas. Ahead of every meeting of the Monetary Policy Committee, the network of Agents, who cover the regions and nations of the UK, present evidence gathered from their meetings with businesses. A summary of the findings from the outreach events is included in this.

A steering group chaired by the Bank’s Chief Economist Huw Pill, who sits on the Monetary Policy Committee, and Sarah Breeden, Executive Director for Financial Stability Strategy and Risk and a member of the Financial Policy Committee, oversees the citizens’ forum programme. A focus for the steering group is finding ways to ensure that the insights gathered from the outreach programmes are fed through to policymakers.

What our policymakers said

‘The citizens’ panels in Southampton, Edinburgh and Belfast that I participated in over the past year were invaluable in understanding how the cost of living crisis is affecting people’s daily lives. They helped me understand how the Bank’s policy response to above-target inflation is seen outside the ‘bubble’ of Threadneedle Street in which we work on a day-to-day basis. Not only did these forums give an insight into the impact of rises in the cost of living and interest rates increases, but they also developed our thinking about how the Bank can communicate more clearly and effectively to explain its decisions.’
Huw Pill, Chief Economist

Footnotes

  • Chief Economist Huw Pill talking at a citizens forum panel event.

‘Understanding the economy and the financial system on the ground, as it affects people day to day, is always important. But it has been especially so this year, given increases in the cost of living and interest rates, and the stretch that brings for household finances. I find these events an invaluable way to dig behind data and headlines to understand people’s experiences in real time. I am extremely grateful to all who give their time to help us.’
Sarah Breeden, Executive Director for Financial Stability Strategy and Risk and member of the Financial Policy Committee

‘Taking part in events across the UK is critical to my role. The economic environment is changing quite quickly, and there have been a number of new challenges over the last few years – navigating a pandemic, supply-chain issues, rising interest rates, slowing growth and geopolitical risks, to name a few. It is therefore really important to hear a range of views across the country so that we can understand risks to financial stability. The Financial Policy Committee is very much focused on the pressures on households and businesses right now. The panel event in Bradford deepened my understanding of how the rising cost of living is affecting different types of households such as retirees, those working, parents or young adults who have just left education, as well as businesses, from small to large firms.’
Elisabeth Stheeman, member of the Financial Policy Committee

More information about our outreach programmes

The citizens’ forum allows the Bank to engage with members of the public across the UK. Anyone aged 16 and above is welcome to join the community, where they have access to events and the online Economy Hub. Panel events are hosted by the Bank’s Agent for the relevant region or nation, alongside a senior member of Bank staff. Since 2018, the Bank has hosted 66 events, and there are currently around 4,000 people in the citizens’ forum community.

Community forums allow Bank officials to hear from underrepresented and lesser-heard groups across the UK. Typically, the Bank works with a third sector organisation, such as a charity or community group, to hear from those who work in the sector as well as their beneficiaries and service users. Since 2017, the Bank has hosted more than 50 events where staff have met with around 1,000 charity workers and the people they support.

Footnotes

  • Some of the members of the youth forum who worked with the Bank during 2022 on a visit to Threadneedle Street.

The youth forum was founded in 2019, and is delivered in partnership with the British Youth Council. It allows the Bank to hear from young people aged 16 to 25. The forum raises awareness about economic issues concerning young people. This year’s forum comprised of 25 representatives across the UK, who worked on projects related to monetary policy, climate change, digital currencies and financial education.

Panel events: what we heard across the UK

From February 2022 to February 2023, we held 10 in-person panel events in Belfast, Bradford, Bristol, Cardiff, Durham, Edinburgh, Falkirk, Liverpool, Manchester and Southampton, and two virtual events for members in Wales and Yorkshire. We also held three UK-wide virtual events and one in-person event for students at Leeds Trinity University.

  • There was a lot of concern about how inflation would exacerbate existing inequality. While some participants felt shielded from the worst of the crisis (eg a civil servant who felt secure in their job) there was acute concern about the fate of others (such as people on benefits). Several people involved in community groups noted the pressure on the finances of these organisations. One of the attendees volunteered at a street kitchen and described the changing profile of service users. Many of these service users were in full-time work. Concerns were also expressed about the impact of rising interest rates on those who had taken advantage of ultra-low rates to take on large mortgages.
  • Exploring the causes of high inflation, Brexit was a prominent topic of discussion across all groups. Many members saw it as a main factor in the cost of living crisis. They specifically pointed to the difficulties in covering the loss of migrant workers in the agricultural sector and in rural communities for example. Members also noted that support for businesses was lacking in comparison to households. A tangible example was that of the hospitality sector suffering huge increases in energy costs; fewer people in their venues, and reduced spending per head. A few participants volunteered or worked for local food banks and noted that rising prices had resulted in a reduction in donations at a time when demand for their services had increased considerably.
  • Members noticed that they had less money left over at the end of each month, making them uncertain about their future ability to make ends meet. An attendee who worked for a church organisation said it was offering its building as a 'warm bank' so local people could save on heating their own houses. Food bank usage was 'scarily high' for those in work but struggling. Supermarket donations had reduced as shoppers had less money to spare. A landlord was seeing higher interest rates on their buy-to-let mortgages, which so far they were covering rather than passing on in higher rents. Students reported that it was becoming harder to obtain part-time work in hospitality in Cardiff.
  • All participants had become increasingly aware of their spending and the rising price of essentials. Even though unemployment levels were low, some people were still finding it hard to find jobs they felt they were well suited to. Charities, meanwhile, were struggling to fill vacancies. It was felt that better financial education and budgeting support for households could help people understand their financial situation and the impact of high inflation.
  • Members were particularly concerned about the impact of higher inflation on lower-income households. Participants also noted the intergenerational effects of rising inflation. Attendees had concerns about rising mortgage costs following the mini budget in September. Some had started to make small changes to their behaviour, including finding cheaper substitutes for their usual shopping staples. One member noted that they would not renew their car when the lease ends and will use their bike more. Another had been overpaying on their electricity bill in anticipation of higher costs. Some were delaying putting their central heating on. 

  • It was agreed that action was needed to tackle high inflation, but some members were not convinced by the Bank’s policies to date. They questioned the purpose of rising interest rates when inflation was mainly being driven by external factors. Others felt that the Bank had been 'behind the curve' in taking action. Everyone had noticed that utility costs were rising. This was prompting some to take measures to try to counter the higher costs, such as by building up a bigger credit buffer ahead of the colder winter months. A student noted that the fixed value of student loans meant spending power was being eroded by higher inflation.
  • Although unemployment rates remain low across the UK, concerns were raised about the quality of jobs available, and levels of pay. As the cost of living continues to rise, few were surprised that food banks and other charities were increasingly supporting those in work, alongside longer-standing clients. People were anxious to know how long the period of high inflation would persist. Some were sceptical that the rate of inflation would come down sharply in the second half of the year, in line with Bank of England forecasts. There was some anger at the feeling that some businesses were profiteering from this period of high prices.
  • Participants were affected in different ways by the emerging cost of living crisis depending on their characteristics and personal situations. Some, for example those on generous pensions or in relatively well-paid employment, had noticed increases in energy bills and the cost of weekly shopping but this was not catastrophic for them. Others on lower incomes noted that they were struggling to afford even essentials such as food. Participants were concerned at rising transport costs. This included carers who relied on private transport to get to work. There was anger at perceived ‘profiteering’ by some businesses.
  • Members were concerned at the cumulative impact of rising costs of food and energy, cuts to Universal Credit, and increases in National Insurance contributions. These were coming against the backdrop of the global pandemic, which had left many households in a far weaker position and without a financial cushion to support them. There was a strong sentiment that there was the inflation rate 'on paper' and a higher one that was more instep with reality for most people. Members were seeing rises in energy bills, especially for those who had been impacted by the failure of a supplier and had to switch to a new provider. Those who were able to work from home were balancing the benefits of saving on travel costs against having to heat the home during the day.

Get involved

To take part in one of our outreach events, sign up at Citizens’ Forum or email:
outreach@bankofengland.co.uk.

This page was last updated 16 January 2024