Agenda item 4 - Cost of living crisis - impact on North Yorkshire and York

2.0       Introduction

2.1      The rising cost of living is the biggest challenge for both households and businesses. In July 2022, consumer price inflation hit 10.1%, more than double the previous forecast of 3.7% and the highest rate for 40 years. The Bank of England expects inflation to peak at 13.3% later this year.

Source: House of Commons Library, Rising Cost of Living in the UK

2.2       The majority of households have seen the impact; in July 89% of adults reported an increase in their cost of living over the previous month. The most common reasons reported by adults for increased cost of living were an increase in the price of food shopping (96%), gas or electricity bills (82%) and the price of fuel (76%). Around three-quarters (76%) of adults reported being very or somewhat worried about rising costs of living in the past two weeks.

2.3       Wages and benefits are not increasing in line with inflation. Real household incomes are expected to fall in 2022. In August, the Bank of England expected post-tax household income to fall by 1.5% in 2022, then fall by 2.25% in 2023, before rising by 0.75% in 2024.

2.4       Poorer households spend over three times as much of their total income on energy bills as richer households, so they are disproportionately affected by energy price rises.  These households spend most of their income on essentials such as fuel, housing and food so are less able to cut back and they have little if any savings to fall back on.  The Resolution Foundation estimated that nationally an extra 1.3 million people will fall into absolute poverty in 2023, including 500,000 children.

2.5       Energy prices are of particular concern. In August, it was announced that the domestic price cap would increase by 80% from £1,971 per year to £3,549 in October 2022. The energy consultancy firm Cornwall Insight forecast that the energy cap in January will be £5,387 and £6,616 in April. The Ofcom energy price cap only applied to consumers, leaving many businesses, voluntary and public sector organisations facing huge rises in their fuel bills.

2.6       The government has announced that typical households will pay no more than £2,500 a year on gas and electricity bills from 1 October 2022 through the Energy Price Guarantee (EPG). The new price guarantee will last for two years and will be paired with the existing Energy Bill Support Scheme (EBSS), which will provide £400 support to households and a £150 saving, brought about by a temporary suspension of green levies on energy bills. The most vulnerable UK households will also continue to receive £1,200 of support provided in instalments over the year. Households who do not pay directly for mains gas and electricity – such as those living in park homes or on heat networks – will receive support through a new fund. The government will also support business, charities and public sector organisations with their energy costs this winter, providing an equivalent guarantee for six months. After this initial six-month scheme, the government will provide ongoing focused support for vulnerable industries.

2.7       The Energy Price Guarantee (EPG) will still mean that typical use will increase by 27% from £1,971 to £2,500 in October 2022. This will be 120% increase of the price cap level in Feb 2021 when the typical use figure was £1,138.
 

3.0       Impact on North Yorkshire and York

3.1       The economy of North Yorkshire and York is characterised by mainly high levels of employment, high levels of skills, high house prices but low wages. Overall, residents experience greater prosperity and less socio-economic deprivation than other parts of England; however, there are pockets of deprivation particularly on the coast. With good skills and employment levels but low wages, ‘in-work poverty’ is an issue. In the more rural areas of the county low wages are compounded by higher living costs, poor digital access and a lack of local services and facilities, resulting in a rural premium. The Cost of Living Vulnerable Households Indicator (Annex B) shows that the relative risk of households falling below an acceptable standard of living as a result of rising costs is highest in coastal Scarborough and rural Richmondshire.

3.2       The poverty premium is the extra cost people on low incomes and in poverty pay for essential products and services (Annex D). This includes using prepayment meters, higher insurance premiums, paying to access cash and high cost credit use. Across

the sub-region, the proportion of households facing the poverty premium is highest in the Scarborough and Whitby (14.1%) and York Central (13.5%) constituency areas.

3.3       Within York and North Yorkshire, there are challenges around fuel poverty – with the worst levels within Scarborough, Richmondshire and Ryedale. The 2020 BEIS Fuel Poverty statistics (Annex E) estimate that 41,794 (15.1%) of households in North Yorkshire and 13,172 (14.7%) of households in York are living in fuel poverty. Almost all of the North Yorkshire districts perform worse than England’s proportion, other than Selby and Harrogate. Much of York and North Yorkshire’s housing stock is rated worse than an Energy Performance Certificate (EPC) rating of C and in rural areas much of the stock is not connected to the gas networks. The current crisis could see these levels further increase. The most recent data published by the University of York estimates that over half of households in the UK will be in fuel poverty from October 2022. If 50% of the households of North Yorkshire and York were to be facing fuel poverty then this would impact approximately 138,000 households in North Yorkshire and 45,000 in York.

3.4       Businesses will also feel the strain of inflation as their utility and materials costs increase. This comes at a time when many have accrued debt throughout the Covid 19 pandemic and have few reserves to counteract this increase. It is also likely that there will be a decreased demand for products and services from customers.  

3.5       The cost of living crisis is expected to increase food insecurity across the country. The Food Foundation estimated that 13.8% of adults experienced food insecurity in April 2022.  Applying this to North Yorkshire and York household projections data would equate to approximately 38,000 households in North Yorkshire and 12,000 households in York being food insecure. Estimates at a more local level (Annex C) suggest that people in Selby, Craven and Scarborough are most likely to have been hungry (skipped food for a whole day or more in the previous month, or indicated they were hungry but had not eaten because they could not afford or get access to food) and are most likely to have struggled to get food (sought help / skipped or shrank meal / given a reason for not having enough food). However, people in York are most likely to be worried about getting food.
 

4.0       Current activities 

4.1       There is a wide variety of support schemes and organisations in York and North Yorkshire delivered by the public and voluntary sector that may be able to help people struggling with the cost of living crisis. These include:

            Examples of food-based schemes operating in North Yorkshire are listed in Annex A.

4.2       Services across North Yorkshire and York are seeing rising levels of demand:

• • NYLAF has seen a 33% increase in applications between 2020/21 and 2021/22 (6,895 in 2020/21 / 9,166 in 2021/22). The biggest increases have been for food and energy vouchers. In July and August NYLAF has seen demand more than double.
  • Warm & Well North Yorkshire saw a 129% increase in demand in 2021/22. In Q1 2022/23 Warm and Well supported 950 individuals compared to 240 in the same period last year.

4.3       National Citizens Advice data shows trends in the cost-of-living crisis and the latest data shows a summer peak of issues traditionally seen in winter. By the end of July 2022 Citizens Advice were expecting to support more people than in 2019 and 2020 combined with access to food banks and other charitable support. The most common types of issues dealt with vary across North Yorkshire and York. For example, in terms of debt, energy debts are the most common issue across North Yorkshire but council tax debt is most common in York.

4.4       People in rural areas of North Yorkshire face a ‘rural premium’ of higher costs of living, high fuel costs, insecure employment and lack of access to services. The Rural Commission considered the challenges and made recommendations on the actions that local partners should take in order to maximise the sustainability of the most rural communities in North Yorkshire. The Rural Task Force is overseeing the implementation of the action plan that includes improving digital accessibility, affordable housing, supporting businesses, funding post-16 education and improving transport.

4.5       In order to better understand the food insecurity landscape in the region, NYCC and CYC have commissioned a joint piece of insight work including the mapping of current provision. This was initiated as part of the Covid recovery work. However, given the new challenges in relation to cost of living increases, its scope has broadened to understand the relative efficacy of a range of community-based food support initiatives in addition to the traditional food bank model. This is highlighting the need to not just provide emergency support such as food parcels but to look at how to strengthen capabilities. 

4.6       Discussions have started around the provision of warm spaces and places this winter. A number of councils across the country have already committed to setting up warm spaces where people can go to shelter from the cold. These discussions include what communities can realistically do to help. Libraries and other community venues who are already open for activities anyway are being encouraged to possibly extend hours / include more people. 

4.7       In North Yorkshire the district and county councils are considering how grants can be used to support VCSE organisations faced with rising fuel costs to enable them to stay open and to support warm spaces activity.

 4.8      The NYCC Wider Partnership conference on 30^th September is entitled ‘Working together to support our communities through the cost of living crisis’. This will include keynote speakers on food insecurity and fuel poverty. There will also be an interactive element with discussions around what we can do together to address issues/improve our capacity to respond. The output will then be taken to the Thriving Communities Partnership. 

4.9       City of York declared a Cost of Living Emergency Crisis at full council in July 2022 and have agreed to host a local Cost of Living Emergency Summit, with stakeholders, including Citizens Advice, Food Banks, Local Trades Unions, and Chambers of Commerce and organisations working to support residents facing hardship.
 

5.0       Possible impacts on services

5.1       The cost of living crisis will affect all public and voluntary sector organisations in North Yorkshire and York. On a financial / operational level, particularly in care and educational settings, these will include:

• Increased energy costs for delivering services
• Increased fleet fuel costs
• Increased costs of materials and transportation
• Increased staffing costs
• Effects of Industrial Action

• Supply chain issues including labour shortages and suppliers going out of business and alternative arrangements having to be made at short notice.

5.2       The cost of living crisis is likely to increase poverty, which in turn is likely to increase demand on services.  Other than the immediate effects of being unable to afford food, fuel and housing amongst other things, poverty impacts on people’s physical and mental health, increases crime and results in poorer educational outcomes. This could lead to short and medium term increases in demand from residents for services such as:

• emergency awards for food and fuel vouchers
• food packages
• welfare benefits and support on claiming benefits 
• debt management
• free school meals
• adult social care and children’s social care (including mental health services)
• public health services such as weight management and drug and alcohol services
• support for digital exclusion in order to access benefits and other support which has to be done online
• trading standards – as a result of increase in illegal money lenders / loan sharks
• homelessness prevention and social housing as people can no longer afford market rents and people are evicted due to rent arrears
• fire service as people burn unsuitable materials to keep warm
• health services as cold weather impacts on people’s mental and physical health

5.3       There are potentially financial / business-operating consequences including:  

• Reduction in council tax revenue / collections for councils
• Increase in rent arrears for social and council housing
• Service users’ decreased ability to pay social care bills / fewer people meeting thresholds for contributions for social care as disposable income falls
• Decrease in use of Council Leisure Services such as gym membership, swimming, exercise classes and museums
• Increase in antisocial activity such as fly-tipping
• Decrease in income, fundraising and donations for voluntary sector organisations as disposable income falls meaning increased demand for infrastructure support and some organisations may fail.

5.4       The cost of living crisis will impact on employees of the partner organisations in North Yorkshire and York. Some potential impacts could include: 

• Staff being unable to travel for work purposes due to the cost of fuel
• Staff being unable to work at home due to the cost of energy impacting on the space requirements of organisations
• Staff leaving for higher paid employment in other sectors and an inability to recruit to posts.

5.5       The cost of living crisis could have other impacts on individuals that will impact on the objectives of the public and voluntary sector partners including:

• Poorer education outcomes
• Reduced opportunities for families to make healthy food choices as the focus is on hunger and warmth rather than health.

6.0       Equalities impacts

6.1       The impact is likely to be more profound in some groups including:

• part-time workers, low-paid workers, those in insecure work
• ethnic minority households
• lone parents
• private renters, who have higher housing costs, and social renters, who tend to have lower incomes, both leading to higher poverty rates.
• individuals living in families where no adults work
• adults with no qualifications

• former looked after children,
• those in poor health and those who have a disability; families with a member with a disability
• those who are or have been in contact with the criminal justice system
• Gypsy and Travellers, living in caravans that get very cold in winter, who do not have direct contracts with energy suppliers and may miss out on the energy bills support scheme.

6.2       Those living in rural areas are also more likely to feel the impact of the crisis. A study by the centre for Rural Economy found that many rural dwellers face fuel poverty, higher costs of living, insecure employment and lack of access to services as these are centralised and digitalized. The state’s welfare systems are poorly adapted to rural circumstances, with lower rates of benefit take-up and additional obstacles to those in towns.

7.0       Recommendations

7.1       That Chief Executives' Group:

•             Reviews the impact of the cost of living crisis on residents in York and North Yorkshire and the support currently being provided locally 
•             Considers whether any additional actions should be undertaken
•             Agrees to receive the output of the Wider Partnership Conference and the York Summit