1. FRSC COL Update Mar 25 Final
Renfrewshire Council · 26 March 2025
Back to Fairer Renfrewshire Sub-committee — 26 March 2025 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: 26 March 2025 _____________________________________________________________________ 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 February 2025, there have been a number of changes in economic factors including a planned increase of 6.4% in the Energy Price Cap from 1 April 2025, meaning households will pay an increasing amount for their energy use, while inflation increased to 3% in the 12 months to January 2025, exceeding the 2% target set by the UK Government. Elected members are asked to note that: • The rate of inflation is standing at 3% in January and has been above the target rate of 2% set by the UK Government for the Bank of England since October 24, when it reached 2.3%. • The inflation rate for food has increased slightly from 3.3% in January, overtaking overall inflation for the first time since September 2024. • The Bank of England interest rate was reduced in February to 4.5% from 4.75% in December and the Bank expects to be able to cut rates further. • The Energy Price Cap, originally introduced by Ofgem in January 2019 to set limits on the underlying rates energy suppliers, is currently at £1,738 from the 1 January until 31 March, but will rise by 6.4% to £1,849 in April 25. 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 February 2025 an overview of key context and evidence around current pressures on household finances, both in terms of household income and expenditure, was examined. Although there has been some easing of cost of living long-term, recent and upcoming changes, especially around food inflation and energy mean that many families are still struggling with costs of living. 3.2. The rising costs of essentials hits low-income families hardest as they spend a greater proportion of their disposable income on these. Concerningly, grocery shoppers are being warned of further food price increases in the coming months and the British Retail Consortium has forecast an average food price rise of 4.2% in the latter half of 2025. 3.3. In addition, the cost of healthy food is rising more quickly that unhealthy food as detailed at part 7 and research from the Food Foundation, indicates that food insecurity is rising, with food insecure households more likely to cut back on food spending on fruit and vegetables as well as dairy and eggs. This research also shows that 38.7% of households on Universal Credit reported experiencing food insecurity. 3.4. Rising fuel costs are also an issue. It is anticipated that the annual energy bill for a household using a typical amount of gas and electricity will go up £111 a year to £1,849 from April 2025. This is the third consecutive price cap rise, and research from Citizens Advice Scotland published in February 2025 shows that people seeking advice from their network had an average energy debt of £2,500 – an 8% increase from last year. 3.5. April traditionally sees changes in charges as the new financial year starts and this may include standard household bills in relation to wider housing and utility costs such as rent or transport costs. 3.6. Benefits rates and wages also tend to rise in April, which will counteract some of the rises. The National Minimum Wage and Living Wage rise in April, and UK benefits linked to inflation will rise by 1.7% in April 2025, as do inflation-linked benefits administered by HMRC. The basic and new State Pension will be uprated by 4.1% from April 2025. 3.7. As was previously reported to elected members, an increasing proportion of households are struggling to pay bills and pay off debts as a result of cost of living increases. A number of reports published since 2022 show increases in the average amount of unsecured debts and arrears owed. Although benefit rates also rise in April, and some rises in charges will not affect those who for example, receive full Housing Benefit and Council Tax Reduction, concern remains that some low income residents may see their financial situation become increasingly precarious.
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3 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 for the period 8 January to 2 February found: • 21% of adults said they had had to borrow more money or use more credit in the last month compared to a year ago. This is the same as the previously reported figure for December 2024, which was 25%. When broken down by age, the highest percentage of 28% was recorded for those between 30 to 49, while 10% of over 70s had to borrow more. 22% of females had to borrow or use credit more as opposed to 19% of males. • 56 % reported that costs of living had increased compared with one month ago, while 42% stated it had stayed the same and 2% said it had decreased. This again was consistent with the previously reported figure. Figures had shown a gradual decrease since October 2022 when 80% of adults reported an increase in living costs, however this figure has started to rise again from September 2024, with the figure being 52% at end September, 53% at end October and 56% in December 2024. More females (58%) reported that rise than males (54%). • For those who reported an increase, costs of food shopping at 89%, (3% less than December) energy bills at 79% (a 7% increase on December figures) and fuel at 48% (a 7% increase) were the most commonly reported reasons. 16% also reported an increase in rent or mortgage costs and 19% a public transport cost increase. The female and male figures for food costs were broadly consistent at 90% and 89% respectively. • Almost 4 in 10 people are spending less on food and essentials and 61% are spending less on non-essentials. 39% report using less fuel such as gas or electricity at home. For females, 41% are spending less on food and essentials and 63% on non-essentials, while for males the figures are 36% and 58%. • 28% have seen an increase in rent or mortgage costs in the last 6 months, and 34% are having difficulty meeting these costs. 5. Employment and Wages 5.1. According to the ONS, the Claimant Count in January 2025, which is taken from JobcentrePlus administration systems, for those claiming unemployment-related benefits in Renfrewshire is 3395 people – 2060 men and 1330 women aged between 16 and 64. This is a reduction from 3,670 in November 2024 and equals 2.9% of the population aged 16-64, a slight reduction on the previous 3% figure. The Scottish figure remains at 3.1% as in November. The Universal Credit rollout, however, affects this figure, which is expected to rise as individuals migrate to Universal Credit. 5.2. The national minimum wage and national living wage (for those aged 21 and over) will rise in April 2025, with the new rates detailed below.
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4 5.3. The increase in rates for those under 21 are part of a long-term plan to move towards an adult single rate of national living wage. 6. Benefits 6.1. Inflation-linked benefits and tax credits will rise by 1.7% from April 2025, in line with the Consumer Prices Index (CPI) rate of inflation in September 2024. The basic and new State Pensions will be uprated by 4.1% from April 2025, in line with the annual increase in the Average Weekly Earnings (AWE) index for May–July 2024. Universal Credit allowances in 2025/26 6.2. Due to the increase in line with CPI, in 2025/26 Universal Credit standard allowances will increase: • From £311.68 to £316.98 per month for single people aged under 25 • From £393.45 to £400.14 per month for single people aged 25 and over • From £489.23 to £497.55 per month for joint claimants both aged under 25 • From £617.60 to £628.10 per month for joint claimants both aged 25 and over 6.3. The Universal Credit childcare costs amount covers the equivalent of 85% of eligible childcare costs. The amounts do not have to be uprated annually but from April 2025 they will be increased in line with CPI inflation of 1.7%. The changes are as follows: • Maximum for one child: from £1,014.63 to £1,031.88 per month • Maximum for two or more children: from £1,739.37 to £1,768.94 per month Pension rates in 2025/26 6.4. The full pension rates for 2025/26 will be: • £230.25 per week for the new State Pension (for those reaching State Pension age on or after 6 April 2016) – up from £221.20 in 2024/25. • £176.45 per week for the basic State Pension (the core amount in the old State Pension system) – up from £169.50 in 2024/25.
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5 Other benefits 6.5. The Department for Work and Pensions (DWP) is required to increase a range of disability and carers’ benefits each year, at least in line with inflation. These include Attendance Allowance, Disability Living Allowance, Personal Independence Payment, Carer’s Allowance, Severe Disablement Allowance, and Industrial Injuries Disablement Benefit. 6.6. Each of these benefits is to be increased in 2025/26 broadly in line with the CPI inflation rate of 1.7%. During the Scottish Budget on 4 December, it was announced that equivalent Scottish benefits will also rise by 1.7%. 6.7. Child Benefit is administered by HM Revenue and Customs (HMRC). There is no statutory requirement for Child Benefit to be increased, but the usual practice is to index it in line with inflation. In 2025/26, Child Benefit is will rise in line with CPI (+1.7%): • For the eldest child, it rises from £25.60 to £26.05 per week. • For each subsequent child, from £16.95 to £17.25 per week. 6.8. From January 2013, the High Income Child Benefit Charge (HIBC) recovered Child Benefit from families where the highest earner had a gross annual income above £50,000. For families where someone earned £60,000 or more, Child Benefit was completely withdrawn. From April 2024, the HIBC threshold was increased to £60,000 with Child Benefit being reduced for those with incomes from £60,000 to £80,000. Above £80,000, Child Benefit is completely withdrawn. 7. Inflation and Food Costs 7.1. Inflation is standing at 3% in January and has been above the target rate of 2% set by the UK Government for the Bank of England since October 24, when it reached 2.3%. The inflation rate for food has increased slightly from 3.3% January, overtaking overall inflation for the first time since September 2024.
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6 7.2. The Food Foundation’s food prices tracker was updated in January. They note that despite food inflation slowing over previous months, food prices still remain high, and this continues to have a significant impact on people struggling across the UK. Their ‘Basic Basket’ is a shopping basket tracker which measures weekly price changes in what the average man and woman could typically eat as part of a reasonably costed, adequately nutritious diet. 7.3. They have been tracking the cost of the Basic Basket, using prices in Tesco, since April 2022. Since then, the woman’s basket of food has increased in price by 27.3%, now costing £52.13 per week. The male basket has increased by 28.6% (non-clubcard price) and currently costs £55.98 per week. This illustrates how though we may see lower rates of inflation, the reality for many is that the cost of food remains high, and may get higher as, according to new modelling by the British Retail Consortium, food prices are forecast to increase by 4.2% on average in the latter half of 2025. 7.4. At the end of January, the Food Foundation published its ‘Broken Plate’ report, which looks at the trends impacting the UK's food system and the actions needed from policymakers in order to ensure everyone can afford healthy and sustainable food. This year's publication highlights that on average healthier foods are more than twice as expensive per calorie as less healthy foods, as defined by the government’s Nutrient Profile Model, averaging £8.80 per 1,000 kcal compared to £4.30 for less healthy foods with healthier food increasing in price at twice the rate in the past two years. 7.5. Furthermore, the report shows that a healthy diet is unaffordable for many people with low incomes. To afford the government-recommended healthy diet, the most deprived fifth of the population would need to spend 45% of their disposable income on food, rising to 70% for those households with children, while with the least deprived fifth of households only need to spend 11%. On average children consume less than half the recommended amount of fruit and veg but twice the recommended amount of sugar.
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7 7.6. Due to the timescales between the last sub-committee and this, there are no new Renfrewshire Foodbank figures to report, however anecdotal evidence from the Foodbank and community food providers indicates that demand for free/low-cost food is still high across Renfrewshire. 8. Interest Rates 8.1. On 6 February 2025, the interest rate was cut to 4.5% from 4.75%. This fall had been predicted by experts, and the Governor of the Bank of England stated that, ‘rates remain on a downward path’, however that this will have to be gradual and careful because of a predicted rise in inflation. 8.2. The Bank of England uses interest rates to try to keep inflation at 2% or less. With the inflation rate remaining above the Bank of England’s target, however, the Bank also predicted that higher energy and water bills would push up inflation "quite sharply" later this year, and warned there were a number of factors that could affect inflation including possible trade tariffs in the US. 8.3. Inflation is now expected to rise to 3.7% and take until the end of 2027 to fall back to its 2% target. 8.4. The interest rate cut means that for the 629,000 homeowners on mortgage tracker deals that move in line with the base rate, there will typically be a £29 fall in monthly repayments. There are nearly 700,000 people on standard variable rate (SVR) mortgages and most lenders have responded to the interest rate reduction by cutting their SVR rates, however some have not, and others have cut these by less than 0.25%. Those on a fixed mortgage deal will see no immediate change to their payments, but there might be cheaper deals available for new and renewing customers.
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8 9. Housing costs Rental Costs 9.1. According to the ONS, private rental prices in Renfrewshire rose to an average of £793 in January 2025, an increase of £16 per month on the last reported figure of £777 in November 2024 and an annual increase of 8.3% from £733 in January 2024. Average rents as of January 2025 in Renfrewshire/Inverclyde by how many bedrooms there are in a property were: • One bedroom: £499 (from £488 in November 24) • Two bedrooms: £663 (from £648 in November 24) • Three bedrooms: £858 (from £839 in November 24) • Four or more bedrooms: £1515 (from £1,497 in November 24) 9.2. Those renting their home from social landlords will also have higher rents to pay from April – Renfrewshire Council agreed an increase of 7.5% in rent for Council tenants on 27th February 2025. There are also a number of rent rises in place from April for other registered social landlords in Renfrewshire. Home ownership 9.3. In general, house prices have continued to rise and ONS figures show that the average cost of a home in Renfrewshire is now £156,000 in December 2024, up 10% from December 23, while the average price paid by first-time buyers was £127,000 in December 2024. This was 9.2% higher than the average of £116,000 in December 2023. For homes bought with a mortgage, the average house price was £171,000 in December 2024. This was 10.8% higher than the average of £154,000 in December 2023. 9.4. This is less than the Scottish figure, where the average house price in December 2024 was £189,000, up from £177,000 a year earlier.
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9 9.5. According to Adzuna, a recruitment agency, the average salary for jobs advertised in Renfrewshire in February 2025 was £33,570, down from £33,971 in November, however up 9% from this time last year. 9.6. For each property type, average prices as of December 2024 in Renfrewshire were: • Detached properties: £364,000 (up from £352,000 in October 24) • Semi-detached properties: £214,000 (up from £207,000 in October 24) • Terraced properties: £156,000 (up from £147,000 in October 24) • Flats and maisonettes: £101,000 (down from £103,000 in October 24) 9.7. Two major lenders recently offered mortgage deals with interest rates of less than 4%, however these are not available to all borrowers. Across the whole market the average rate on a two-year fixed deal is 5.48%. The typical rate on five-year deals is 5.29%, according to latest figures from Moneyfacts. 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 October to 31 December 2024, the price cap rose 10%, meaning an average household on typical usage, paying by Direct Debit for dual fuel was paying £1,717 a year, up £149 from the previous cap. The increase was across both unit costs and standing charges. This was followed by a 1.2% increase from 1 January to 30 March 2025, with a rise to £1,738 for the average household and now a further 6.4% rise from April 2025 to £1849. 10.2. The Ofgem cap is based on a "typical household" using 11,500 kWh of gas and 2,700 kWh of electricity a year with a single bill for gas and electricity, settled by direct debit. Those who pay their bills every three months by cash or cheque will pay more at approximately £1,969, while households on prepayment meters will pay slightly less than those on direct debit, with a typical bill of £1,803. This price, however, although lower than other payment methods, is a rise of £113 from the previous quarter. 10.3. All households pay standing charges for energy. This means that even were they to use no energy at all, there would still be a daily charge to cover the costs of being connected to a supply. The charge is typically 61p a day for electricity and 32p a day for gas, although they vary slightly by region. Under the energy price cap, standing charges have risen by 43% since 2019. 10.4. As previously reported, Ofgem has proposed that from winter energy firms must provide a choice of price-capped tariffs from winter 2025, one which has a standing charge and unit rate - as is the case now - and another with no standing charge but a higher unit rate. Recognising an issue, especially for low energy usage households with standing charges, this change would allow customers to choose which tariff would suit them best. 10.5. Ofgem are now consulting on this proposal, seeking views on the introduction of an option within the price cap that does not have a standing charge, as a way of addressing the market’s failure to offer a wider variety of products where consumers have expressed a
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10 strong demand. It is intended that this would be alongside the existing price cap options that include a standing charge. The consultation closes on 20 March 2025. 10.6. Ofgem has also set out its debt strategy which aims to tackle the growing impacts of rising debt in the energy system, and to create lasting change in the way debt is managed and customers in debt are supported. Between 12 December and 7 February they consulted on introducing a debt relief scheme for people who have got behind with their energy bills during the energy crisis and may struggle to repay. 10.7. If there is support from the consultation to go ahead with a debt relief scheme, Ofgem aim to publish a statutory consultation in spring 2025. Details of this will be reported to the Sub- Committee as they are known. 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.
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11 14. COSLA Policy Position – none Author: Diane Dunn, Fairer Renfrewshire Lead Officer, diane.dunn@renfrewshire.gov.uk