1a. FRSC COL Update Sep 24 FINAL LM
Renfrewshire Council · 4 September 2024
Back to Fairer Renfrewshire Sub-committee — 4 September 2024 and its agenda
Text extracted from the council's PDF. Layout and reading order may differ from the original.
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1 ________________________________________________________________________ To: Fairer Renfrewshire Sub-Committee On: 4 September 2024 _____________________________________________________________________ Report by: Chief Executive _____________________________________________________________________ Heading: Cost-of-living Update ________________________________________________________________________ 1. Summary 1.1 At each of the Fairer Renfrewshire Sub-Committee meetings, an overview of key context and evidence around current pressures on household finances, both in terms of household income and expenditure has been provided to members. 1.2 Since the last meeting of the Sub-Committee on 5 June 2024, there have been a number of changes in economic factors including a decrease in the Energy Price Cap from 1 July 24, (although this is due to rise again in October), meaning households are paying slightly less currently for their energy use, while inflation has also decreased, meeting the 2% target set by the UK Government for May and June, then rising again to 2.2% in July (announced on 14 August). Interest rates also reduced on 1 August based on the inflation decreases in May and June. Elected members are asked to note that: • The rate of inflation is standing at 2.2%, having reduced to 2% (May and June 24), so now is slightly above the target rate set by the UK Government for the Bank of England • The inflation rate for food has continued to reduce; now 1.5%. • The Bank of England has reduced the interest rate to 5% from 5.25%. The rate had been at 5.25% since August 2023 until it was reduced on 1 August. • The Energy Price Cap, originally introduced by Ofgem in January 2019 to set limits on the underlying rates energy suppliers, is now set at £1,568 from the 1 July until 30 September. This is £122 lower than the previous quarter, however will rise to £1,717 from 1 October. 1.3 This paper provides an overview of information collated by officers in relation at both a national and local level where available.
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2 2. Recommendations 2.1 It is recommended that members of the Fairer Renfrewshire Sub-Committee note the content of the report. 3. Background 3.1. At the Fairer Renfrewshire Sub-Committee meeting on 5 June 2024 an overview of key context and evidence around current pressures on household finances, both in terms of household income and expenditure was examined. 3.2. Although there have been some reductions in financial pressures, as detailed in 1.2, costs for households are still high. Over the three years between May 2021 and May 2024 food prices rose by 30.6%. The Office for National Statistics June ‘Public opinions and social trends, Great Britain bulletin’ reported that 87% of adults see the cost of living as an important issue facing the UK, with this higher, at 93%, for those aged 16 to 29 years. 3.3. 51% of adults in June 2024 stated that their costs of living had increased compared with the month before and over the past two years, the proportion of people finding it very or somewhat difficult to afford their rent or mortgage has gradually increased from around 3 in 10 (30% in the period 16 March to 27 March 2022) to around 4 in 10 (42% in the latest period). 3.4. According to StepChange Scotland, Scotland’s households continue to be under pressure, with households headed by women, disabled, or young people at the sharpest edge of the cost of living crisis. They also point to a growing impact on in-work households, who are relying on credit and falling behind on essential bills. 4. Impacts of cost-of-living crisis Living costs 4.1. The latest insights into the cost of living from the Office of National Statistics in June found: • 51% of adults said their costs of living had increased compared with one month ago, while 47% said it had stayed the same. This has decreased gradually since October 2022 when 80% of adults reported an increase. • For those who reported an increase, costs of food shopping at 93%, fuel at 52% and energy bills at 47% were the most commonly reported reasons. • 4 in 10 people are finding it difficult to pay for energy or housing. 4.2. Although the Financial Conduct Authority cost of living survey found that from January 2023 to January 2024, fewer people are finding it hard to manage the higher costs of living many people are still struggling with finances. Their figures show that 4.3m more people are “coping” with the cost of living, 3.5m fewer people feel “heavily burdened” by their bills and credit commitments, and 1.1m fewer people have fallen behind or missed a payment on one or more bill or credit commitment in the last 6 months. However:
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3 • 14.6m people report “not coping” with the cost of living • 7.4m feel heavily burdened by their bills or credit • 5.5m people across the UK report falling behind on a bill or credit commitment in the last 3 months. 4.3. This survey also shows no decline in the numbers across the UK who have gone without meals or used a Foodbank. 5. Employment and Wages 5.1. According to the ONS, the Claimant Count, which is taken from JobcentrePlus administration systems, for those claiming unemployment-related benefits in Renfrewshire remains at 3.1% as it was in March 2024. This currently equates to 3,575 people aged between 16 and 64 and is down from June 2023, when there were over 3,700 claimants. 5.2. Around 26,200 people aged 16 to 64 years in Renfrewshire were "economically inactive" in the year ending March 2024. This is an increase based on the previous reported figure of 25,100 in the year ending December 2023. People are classed as "economically inactive" if they are not in employment but don't meet the criteria for being "unemployed". This means they have not been seeking work within the previous four weeks or were unable to start work within the next two weeks. Common reasons include being retired, looking after the home or family or being temporarily or long-term sick and disabled. Of those who are economically inactive, 86.4% are not looking for employment. 5.3. The ONS has reported that on average regular pay excluding bonuses rose by 5.7% in the three months to May 24, compared with the same period a year earlier. That was a slight fall from the
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4 6.0% increase seen in the previous quarter. Annual growth in real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH)) for regular pay was 2.5%, and for total pay was 2.2%. 5.4. Average weekly earnings in both total pay and regular pay (excluding bonuses) remains strong and shows a steady increase over the long term. Average weekly earnings were estimated at £689 for total earnings, up from £677 in the quarter to February 24 and £643 for regular earnings, up from £633. Debt 5.5. StepChange Scotland published their Scotland in the Red report on 26 June 24. The report highlights how cost of living and inflationary pressures continue to impact households and identifies how their clients in Scotland continue to be affected by problem debt. 5.6. Although the report is based on clients who have come forward to StepChange Scotland for debt advice, the report gives an indication of the issues households are facing. • 25% of their clients say their main reason for problem debt is costs of living • 31% of their clients are in a deficit budget, meaning their spend on essentials is higher than their income can cover • 55% of their clients are in full or part time work • 43% have children with 22% being single parents 5.7. The Renfrewshire clients who used this service on average had £18,851 in unsecured debt and £3,311 arrears in household bills. 69% were in arrears with at least one household bill, with 42%
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5 of all clients behind on energy bills. This figure rose for those receiving Universal Credit, with 75% of those receiving this benefit in arrears with dual fuel bills. 5.8. Elected members will note from the Cost of Living Dashboard that the amount of debt under management by both Renfrewshire Citizens Advice and Advice Works has sharply risen in the last quarter, at £2,408,161 compared to £740,768 in the previous quarter. RCAB have pointed to an increased amount of debt from mortgages as the main reason for the increase they have seen, with people struggling as fixed rate mortgage deals end and repayments increase. This increase in housing costs has a knock on effect with clients ‘maxing out’ credit cards on household expenditure and then coming forward for debt advice when they cannot afford to make payments. 5.9. This may be driving an increase in clients who are working coming forward for advice. Figures from Renfrewshire Citizens Advice Bureau show that of the 1446 clients seen this quarter, 455 were working either full time or part time. The numbers of those working who are accessing the service has risen steadily over the last year. 5.10. Advice Works are not seeing the same progressive rise, however in the last 2 quarters do show an increase in employed clients, with over 200 being seen in Q4 of 23/24 and 191 in Q1 of 24/25. Previous quarters averaged around 160. Advice Works also note that their new case management system seems to capture more robust information than the previous system, so some of the increase in debt may be ascribed to this. These trends will be monitored over time, with further information captured around debt and changes in client type. 6. Benefits 6.1. The UK Government has announced that older adults of state pensionable age in England and Wales not in receipt of Pension Credit or other means tested benefits will no longer be entitled to Winter Fuel Payment. The payment can be worth between £100 and £300 depending on circumstances. 0 50 100 150 200 250 300 350 400 450 500 Q1 23/24 Q2 23/24 Q3 23/24 Q4 23/24 Q1 24/25 Numbers of Clients working RCAB
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6 6.2. This benefit has been devolved to Scotland, and the Scottish Government had previously announced it would replace Winter Fuel Payments with its own scheme called the 'Pension Age Winter Heating Payment' (PAWHP) this coming winter. These payments would still be worth between £100 and £300 and would be paid to everyone over State Pension age. 6.3. On 14 August, the Scottish Government announced that due to the change in Block-Grant associated with the change to eligibility for Winter Fuel Payment, the payment in Scotland will also be restricted to those on eligible benefits. PAWHP will also be deferred until 24/25, to allow more time to plan in light of the change to eligibility criteria. Because Winter Fuel payment has already been devolved, Scottish Government are in discussion with the Department for Work and Pensions which has committed to administer a payment equivalent to Winter Fuel Payment to older people in Scotland this year. 6.4. Using figures from DWP it is estimated that around 2,500 households in Renfrewshire may be missing out on Pension Credit, and therefore this will need to be a key focus of local partners in the coming months. 7. Inflation and the Impact on Households 7.1. UK consumer prices, as measured by the Consumer Prices Index (CPI) were 2.2% higher in July 2024 than a year before, with the inflation rate rising slightly from 2% in May and June 24. This means that the cost of living is still rising but at a rate that the Bank of England had expected. The increase is largely due to the prices of gas and electricity falling by less than they did a year ago. 7.2. In August, the Bank of England stated that they think inflation is likely to increase to 2.75% towards the end of 2024, then fall back again after that. In June, the largest upward contribution to the monthly change in the inflation rate came from restaurants and hotels, where prices of hotels rose more than a year ago; the largest downward contribution came from clothing and footwear, with prices of garments falling this year having risen a year ago. In July, hotel costs fell, however energy costs didn’t fall as much as expected. 7.3. As previously reported, a falling inflation rate does not mean that price levels are falling. It means that prices are rising, but more slowly than they were before. For example, if the annual inflation rate is 2.2%, this means prices are rising by 2.2% compared with a year before. 7.4. UK food and non-alcoholic drink prices were 1.5% higher in June 2024 compared with the previous year, based on the CPI measure of inflation. This continued the decline from the recent peak of 19.1% in March 2023, which was the highest rate of increase in food prices since 1977 according to the Office for National Statistics (ONS). Over the three years between May 21 and May 24, food prices rose by 30.6%. It previously took over 13 years from January 2008 to May 2021 for average food prices to rise by the same amount. The main downward effects came from a combination of bread and cereals, meat, and fruit. 7.5. The Food Foundation (www.foodfoundation.org.uk) produce a ‘Basic Basket Tracker’, which tracks a basket of food for both a working age male and female over time to give an indication of
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7 trends in food prices and how this might be impacting on the cost of buying sufficient food. The male basket has slightly more items and men have higher calorie requirements and so this basket costs slightly more than the female basket. The products in the basket are based on the Minimum Income Standard basket developed by Loughborough University’s Centre for Research in Social Policy funded by the Joseph Rowntree Foundation and are based on prices at Tesco. 7.6. The tracker shows that since April 2022, the price of the women’s basket has increased by 23.8% while the man’s has increased by 26.2%. The basket include items such as milk, eggs, cheese, fruit and vegetables, tinned soup, bread and tea and coffee. 7.7. Analysis of the basket has shown that not only has the overall cost increased but that these increases were even more significant for vegetables in the basket. The cost of the vegetables has risen by 39% on average, with some items like carrots increasing by as much as 150%. This is significantly higher than the overall increase of both the baskets and indicates that many may be facing barriers to eating healthily. 7.8. In Renfrewshire 1,400 Foodbank Vouchers were issued in Quarter 1, in comparison with 1,148 issued in the same quarter the previous year, an increase of almost 22%. The vouchers covered 1863 adults and 866 children this year, which was an increase in total number receiving assistance compared to the same quarter last year (1473 adults and 589 children). 7.9. The rising costs of essentials remains the most commonly cited factor in the reason for voucher issue in Renfrewshire, at 716 times. This is compared to the second most cited factor, ongoing impact of physical or mental health condition at 185 times. Priority debt continues to be the third most cited factor, at 164 times.
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8 7.10. The table below shows the number of Vouchers fulfilled per Ward in Quarter 1 2024/25 compared to Quarter 1 last year. Although numbers are still small, the highest percentage rise was within Bishopton, Bridge of Weir and Langbank, where 21 vouchers were issued in Q1 this year, compared to 12 last year. Paisley Northwest had the highest numerical rise, from 372 to 481, a rise of 29%. 7.11. Renfrewshire Foodbank has recently opened and extended their Paisley distribution on a Wednesday afternoon to 18.45 to ensure people who are employed can access this. This service has been used by a number of people, however figures for those with income from earnings in Q1 remain consistent with those in the latter quarters of last year. 8. Interest Rates 8.1. The Bank of England has a target to keep inflation at 2%. In May and June the inflation rate was 2%, the lowest rate in 3 years, however, the Bank of England kept interest rates at 5.25% for the 7th consecutive month. On 1 August, however, the interest rate was reduced to 5%. This reduction means that mortgage holders on a variable rate will see an immediate reduction of an average £28 in their monthly mortgage payments. Many homeowners, however, still face the prospect of much higher mortgage rates when their current fixed rate expires. 0 100 200 300 400 500 600 Foodbank Vouchers per Ward Number of Vouchers Q1 (23/24) Number of Vouchers Q1 (24/25)
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9 8.2. More than 8 in 10 mortgage customers have a fixed rate mortgage. According to the banking trade body, UK Finance, 1.6 million existing borrowers in Britain have fixed term mortgages at a relatively cheap level due to expire this year, many of them at rates of less than 2%. According to Moneyfacts, the average two-year and five-year fixed rate mortgages currently available are 5.92% and 5.5% respectively. A recent report by the Bank of England, said that about three million households were set to see their mortgage payments rise in the next two years, including 400,000 mortgage holders who were facing some “very large" payment increases. 8.3. The next announcement on Interest Rates will be on 19 September, however Bank of England governor Andrew Bailey said following August's rates decision: "Inflationary pressures have eased enough that we've been able to cut interest rates today." But he warned: "We need to make sure inflation stays low and be careful not to cut interest rates too quickly or by too much." The International Monetary Fund has also warned that persistent inflation might mean interest rates have to stay higher for longer, with financial markets expecting two reductions in rate by the end of 2024, taking rates down to 4.75%. 9. Housing costs Rental Costs 9.1. According to the ONS, private rental prices in Renfrewshire rose to an average of £749 in June 2024, an annual increase of 9.5% from £684 in June 2023. This was higher than the Scottish rise of 8.4% over the year. Average rents as of June 2024 in Renfrewshire/Inverclyde were: • One bedroom: £469 • Two bedrooms: £624 • Three bedrooms: £808 • Four or more bedrooms: £1,454
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10 Taking the data instead by property type, average rents were: • Flats and maisonettes: £580 • Terraced properties: £743 • Semi-detached properties: £796 • Detached properties: £1,214 Home ownership 9.2. According to figures from Registers of Scotland and the ONS, for people living Scotland the gap between what people earn and the average price of a home has grown substantially over the last 20 years. In 2003/04 the average home cost 3.8 times the typical salary - a gap of £55,000 between income and house price. But by last year that had increased to 5.2 times the average annual pay - a gap of £150,000. 9.3. Local figures show that the median cost of a home in Renfrewshire is now £145,000, while a new home averages £298,000, while the average Scottish annual salary is £35,518. 9.4. Widening house price to income ratios make it more difficult for 1st time buyers to become home owners, and Registers of Scotland Data shows that the volume of house sales funded by a mortgage has dropped from 84.5% in 2007/8 to 64% most recently. This has implications for those who are renting, and will subject to increases made by landlords throughout their lives. This is especially pertinent for future retirees, who would have previously had no housing costs due to owning their home outright after paying off their mortgages, and will now continue to have rental costs throughout retirement. 9.5. For those buying a home, ONS figures indicate the average price paid by first-time buyers in Renfrewshire was £131,000 in May 2024. This was 5.6% higher than the average of £124,000 in May
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11 2023. For homes bought with a mortgage, the average house price was £172,000 in May 2024. This was 3.4% higher than the average of £161,000 in May 2023. Tenant Satisfaction 9.6. A report was brought to the Communities and Housing Policy Board in August 2024, with the results of a Tenant Satisfaction Survey. 9.7. Seven in ten respondents (70%) were of the opinion their rent represents very or fairly good value for money. Although satisfaction with this indicator has reduced from 83% it has also seen a very large shift in those who responded Neither Satisfied Nor Dissatisfied from 7% in 2022 to 18% in 2024. The 12% of respondents who felt the rent they paid was not good value for money were asked to explain why they had said that. The main reasons were that rents were too expensive, dissatisfaction with rent increases or dissatisfaction with the quality of the home. 9.8. This response is not unexpected in the context of the last few years when both tenants and social landlords have been facing some of the most challenging economic times. The cost-of-living crisis continues to cause hardship for many social housing tenants, whilst landlords are also facing increasing costs to deliver their core services whilst investing in maintaining and improving their homes. However, it remains the case that our average rental charge is lower than that of other social housing providers in Renfrewshire. 9.9. The survey asks a wide range of questions relating to how tenants feel about; their own homes, neighbourhoods and general environment, services provided, and how these could be improved, value for money; and how the Council communicates with them and how they prefer to receive information. It was also noted there are some disparate satisfaction results for certain groups, in particular disabled tenants and lone parent households.
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12 10. Fuel – Energy Costs for Households 10.1. Every three months, Ofgem reviews and sets a level on how much an energy supplier can charge for each unit of energy. This is known as the price cap. From 1 July to 30 September 2024, the price cap fell by 7%. Therefore, an average household on typical usage, paying by Direct Debit for dual fuel is currently paying £1,568 a year, down £122 from the previous cap. It has been announced, however, that from 1 October, the cap will rise again by 10% to £1,717, an increase of £149 on the current cap. 10.2. From 1 October, households on prepayment meters will pay slightly less than those on direct debit, with a typical bill of £1,669 a year. The rates per unit for both gas and electricity are slightly less for those with a pre-payment meter compared to those that pay by Direct Debit, with standing charges charged at the same rate. The current predictions from analysts Cornwall Insight are that after the 1 October rise, the Energy Price Cap will rise again by 3% in January 2025, to £1,762 a year for a typical household. 10.3. Recent high costs of energy, as well as high costs of living more generally, have affected families with low incomes, with debt more common on priority bills. Ofgem data indicates that the number of accounts behind on their gas and electricity bills has reached the highest level since records began in 2012. Their data shows the total value of debt and arrears owed by customers to suppliers has risen substantially since 2018. After sustained increases during 2021 and the first half of 2022, the value stayed relatively steady until Q1 2023, after which it has risen sharply. Between Q4 2023 and Q1 2024, it rose by 7%, from £3.10bn to £3.32bn. 10.4. Ofgem reports that previously there was typically a seasonal pattern to energy debt. Debt generally fell towards the end of the year when customers were billed for the warmer months. It then rose in the spring as customers fell into arrears following higher energy usage during the winter months. The seasonal trend was more pronounced with gas, most likely due to the importance of gas heating during winter, however, since 2018 this trend has all but disappeared.
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13 10.5. Consumer Scotland’s most recent tracker has found that energy bills are becoming more affordable, albeit still higher than two years ago, and households feel their financial outlook is improving. • Just over one quarter (26%) of households say that it is difficult to keep up with energy bills, down from 35% in winter 2022/23, and lower than at any point since they started the tracker survey. • The proportion of people expecting to feel worse off in three months’ time has fallen from 60% in winter 2022/23 to 30% in January/February this year. However: • More than one in twelve households (9%) in Scotland are in energy debt • 48% of those in debt are not confident they will be able to clear this debt. 10.6. Some groups are particularly likely to face affordability challenges and the most recent tracker shows households with an income of less than £20,000, households including disabled people, and those with a child under 5 years old are more likely to experience energy debt. Although consumers report cutting back spending to afford energy bills, those in energy debt are much more likely to do so.
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14 Implications of the Report 1. Financial – There are no financial implications associated with this report, which provides an overview of the position and is for noting. 2. HR & Organisational Development – none 3. Community/Council Planning – This report provides a detailed summary of the current evidence relating to household income and expenditure. Wider poverty related issues are a key element of both the Council and Community Plan and the information included within this report is part of the wider Strategic Needs Assessment for these plans. 4. Legal - none 5. Property/Assets - none 6. Information Technology - none 7. Equality and Human Rights – The report provides an overview of the position around household income and expenditure, and is for noting. As such there are no impacts arising from the recommendation of this paper. It is however important to note that impacts on households explored within this paper are likely to be disproportionately felt by equality groups. 8. Health and Safety - none 9. Procurement – none 10. Risk – none 11. Privacy Impact – none 12. Climate Risk - none 13. Children’s rights – the articles within UNCRC underpin the work that is being progressed in Renfrewshire through the Fairer Renfrewshire programme, particularly in relation to rights in relation to aspects such as life, survival and development, food, clothing and a safe home and supporting the best interests of the child and their families. Child poverty and family wellbeing are key local partnership priorities. 14. COSLA Policy Position – none Author: Diane Dunn, Fairer Renfrewshire Lead Officer, diane.dunn@renfrewshire.gov.uk