Global influences on the cost of a minimum standard of living in the UK

In recent years, relatively large increases in the price of food, domestic energy and some other essentials have caused the minimum cost of living to rise faster than the general inflation rate. This creates an important domestic issue: how to prevent a fall in living standards for disadvantaged groups whose incomes are often linked to general inflation but whose living costs are rising faster than this. But it also raises questions about the role of global influences on economic disadvantage in the United Kingdom. The global cost of commodities and of imported consumer goods today have important impacts on the price of essentials. This paper explores ways in which this might affect the future ability of households in the UK to afford a minimum acceptable standard of living. This question can be addressed through the Minimum Income Standard (MIS), a measure of how much money households in the UK need in order to reach a minimum acceptable standard of living, based on what members of the public think. An examination of the main areas of spending that comprise this standard shows which have been the main drivers in recent years of rises in essential living costs, susceptible to global influences on price. This analysis identifies three such categories in particular: food, domestic fuel and clothing. The price of these items in the UK is being influenced by a long-term rise in world demand for commodities, and by limits to global energy use related to the supply of fuels and efforts to contain their impact on the environment. These factors have driven a general increase in food and fuel prices, especially since 2007, and are likely to push these prices higher in the future. However, world commodity prices are also highly volatile, partly because of fluctuations in world demand but also because the prospect of large price hikes has attracted speculation, which can sometimes accentuate price movements. UK consumers have been protected from the extremes of commodity price movements, but nevertheless could in future face uncertainty over the price of essentials that makes it harder for those on low incomes to budget. (Continues...).