1a. Cost-of-living Update
Renfrewshire Council · 28 May 2025
Back to Fairer Renfrewshire Sub-committee — 28 May 2025 and its agenda
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________________________________________________________________________ To: Fairer Renfrewshire Sub-Committee On: 28 May 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 26 March 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 decreased to 2.6% in the 12 months to January 2025, down from 2.8% in February but still exceeding the 2% target set by the UK Government. Elected members are asked to note that: • The rate of inflation is standing at 2.6% in March 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 decreased slightly to 3% from 3.3% in February, still higher than overall inflation. • The Bank of England interest rate was reduced in May to 4.25% from the 4.5% set in February 2025. • The Energy Price Cap, originally introduced by Ofgem in January 2019 to set limits on the underlying rates energy suppliers, is currently at £1,849 from 1 April, up from £1,738 for the previous quarter. 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. 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 26 March 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. The Resolution Foundation has found that lower-income families are most affected by surging food prices as they spend a far greater share of their family budgets on food (14%, compared to 9% for the highest-income households). As a result, the effective inflation rate for the poorest tenth of households is around 2% higher than it is for the richest tenth of households. 3.3 Rising fuel costs continue to be a challenge for many households. The annual energy bill for a household using a typical amount of gas and electricity went up £111 a year to £1,849 from April. This is the third consecutive price cap rise, although according to the consultancy Cornwall Insight, the energy price cap is set to fall in July, to an estimated £1,712.27. According to the End Fuel Poverty Coalition, household energy debt is at record levels. In 2024, over £3.7bn was owed for both domestic electricity and gas, compared with £1.8bn in 2021. 3.4 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. Figures from our own advice services also show that debt is not declining, with an increase in debt under management of 7.4% this year compared to last, as detailed in the Data Dashboard. 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 5 to 30 March 2025 found: • 87% of those surveyed reported the cost of living as the most important issue facing the UK today and 66% reported that their cost of living had increased compared with a month ago. • For those who reported an increase, costs of food shopping at 91%, energy bills at 78% and fuel at 49% were the most commonly reported reasons. 33% also reported an increase in rent or mortgage costs and 35% a public transport cost increase.
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• Around 1 in 33 (3%) adults reported that they had run out of food and were unable to buy more in the past two weeks; increasing to 20% for households with a single adult and at least one dependent child, and 14% for adults paying rent to the council or housing association. • Disabled adults were more likely than non-disabled adults to carry out a range of actions ONS asked about because of their increased cost of living; this included using less fuel in their home (49% compared with 37%) and spending less on food shopping and essentials (48% compared with 36%). • 20% 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 a slight decrease from the 21% reported in the last sub- committee papers. When broken down by age, the highest percentage of 28% was recorded for those between 30 to 49 (the same as previously), while 9% of over 70s had to borrow more, a reduction on the 10% reported previously. • Parents were more likely than non-parents to be unable to pay a necessary but unexpected expense of £850 (33% compared with 21%) and to borrow more money than usual in the last month (34% compared with 17%). • Lone parent households with a single adult and at least one dependant child were more likely than households with more than a single adult and at least one dependant child to report that they had run out of food and were unable to buy more in the past two weeks (20% compared with 2%). They were also more likely to report: o being unable to pay a necessary but unexpected expense of £850 (64% compared with 27%) o borrowing more money than usual in the last month (49% compared with 26%) o being unable to pay a bill or standing order (27% compared with 4%) 5 Employment and Wages
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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 3375 people – 2035 men and 1340 women aged between 16 and 64. This is a reduction from 3,395 last reported. The Renfrewshire unemployment rate of 2.9 % is less than the Scotland rate (3.2%) 5.2 ONS figures for the UK show that from the period from December 2024 to February 2025, annual growth in employees' average earnings for regular earnings (excluding bonuses) was 5.9% and total earnings (including bonuses) was 5.6%. Annual average regular earnings growth was 5.9% for the private sector and 5.7% for the public sector. These increases are all above the rate of inflation. 5.3 Over the long term, UK average weekly earnings for both total and regular pay show a steady increase. Average weekly earnings were estimated at £716 for total earnings and £670 for regular earnings in February 2025. 6 Benefits 6.1 On 22 April 2025 Pension Age Disability Payment became available across Scotland after a phased roll out. From this date, people in Renfrewshire who are over state pension age with a disability or long-term health condition that means they need help looking after themselves or supervision to stay safe will now claim the Scottish benefit, rather than Attendance Allowance from the Department for Work and Pensions. It is also available pensioners who are terminally ill. 6.2 People in Scotland who are getting Attendance Allowance from the DWP do not need to do anything as their award transfer will happen automatically. Social Security Scotland will write to people to let them know when this is happening and when this is complete. Social Security Scotland aims to complete case transfer for everyone by the end of 2025. 6.3 Pension Age Disability Payment is paid at 2 different rates, lower and higher. The amount received depends on care needs. • Lower rate is £73.90 a week. It’s for people who need help or supervision during the day or night.
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• Higher rate is £110.40 a week. It’s for people who need help or supervision during the day and night. Those who are terminally ill will automatically get the higher rate. 6.4 Pension Age Disability Payment is not means-tested. Claimants’ income and savings are not taken into account and will not affect any award received. 6.5 In the UK Government’s Spring Statement 2025 reform measures for health and disability benefits were announced and there is currently an open consultation taking place on the proposed reforms. Were these reforms to be introduced, it is expected that all those receiving PIP in Scotland would have transferred to the devolved Scottish equivalent, Adult Disability Payment, by the time they were introduced. 6.6 Universal Credit changes are also proposed, which would affect those in Scotland as this remains a reserved benefit. The UC health element will be frozen in cash terms at £97pw until 2029/2030 for existing recipients. The UC health element rate for new claimants will be reduced to £50pw in 2026/2027 and then frozen until 2029/2030. PIP can also be used as a gateway to the health element of UC, so were PIP and Adult Disability Payment to become significantly different, this may have an impact on entitlement to this element for those in Scotland. 7 Inflation, Food Costs and Foodbank use 7.1 Inflation is standing at 2.6% in March 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 rate, however has decreased from the February rate of 2.8%. The largest downward contributions came from recreation and culture and motor fuels. 7.2 In its February 2025 set of forecasts, the Bank of England expects inflation to rise to 3.7% by Q3 2025, before easing slowly back to 2.0% in Q4 2027. 7.3 The inflation rate for food has decreased slightly from 3.3% in January and is now standing at 3%. The Institute of Grocery Distribution (IGD) has warned, however, that food prices could rise by
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more than double the Bank of England’s 2% inflation target predicting that food prices would increase by an average of 2.4% to 4.9% in 2025. 7.4 It points to measures, such as national insurance and increases to the national living wage, resulting in higher, unexpected costs for supermarkets and estimates that the supermarkets will absorb between 20% and 40% of these extra costs, with the rest being passed on to shoppers through higher food prices. 7.5 In Renfrewshire, the Renfrewshire Foodbank issued 5,411 vouchers in total in 2024/25, in comparison with 5,267 the previous year, an increase of 2.7%. The vouchers covered 7,075 adults and 3,409 children this year, which was an increase in the total number receiving assistance with 10,484 compared to 9,615 last year (6,724 adults and 2,891 children). 7.6 In terms of vouchers issued per ward, the largest increase was seen in the Bishopton, Bridge of Weir & Langbank area, although numbers are small in comparison to other wards. 62 vouchers were issued in 2024/25 compared to 42 the previous year, an increase of 48%. The biggest decrease of vouchers was seen in Houston, Crosslee and Linwood area. 235 vouchers were issued in 2024/25 compared to 254 the previous year, a decrease of 7.5%. Paisley Northwest remains the ward with the highest number of vouchers issued. 7.7 In 2024/25, the rising cost of essentials was cited the number one reason for voucher issue in Renfrewshire, at 2,510 times. The ongoing impact of a physical or mental health condition was the second most cited reason for voucher issue, at 697 times. These top two reasons remain consistent with the previous year. The third most cited reason for voucher issue in 2024/25 is “other unexpected expense”.
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8 Interest and Mortgage Rates 8.1 The Bank's main rate was reduced to 4.25% on 7 May, as previously reported, it was forecast to reduce the rate twice this year, but the current expectation is now three more cuts. Some analysts are forecasting a base rate of around 3.75% or 3.5% by the end of the year. However, although this is good news for those with tracker mortgages, or who are seeking a new fixed term deal, more than eight in 10 mortgage customers have current fixed-rate deals. The interest rate on this kind of mortgage does not change until the deal expires, usually after two or five years, and a new one is chosen to replace it. About 800,000 fixed-rate mortgages, currently with an interest rate of 3% or below, are expected to expire every year, on average, until the end of 2027, so this will still mean an increase in housing costs for those householders. 8.2 By mid-April, all major lenders were offering fixed rate mortgages of less than 4%, to some customers. The average rate for a two-year fixed deal is now 5.21%, according to the financial information service Moneyfacts. A typical five-year deal has a rate of 5.12%. 8.3 As elected members are aware, 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 the possible trade tariffs in the US. 8.4 As stated at 7.2, inflation is now expected to rise to 3.7% and take until the end of 2027 to fall back to its 2% target. 9 Housing costs Rental Costs 9.1 According to the ONS, private rental prices in Renfrewshire have continued to rise to an average of £802 in March 2025, an increase of £9 per month on the last reported figure of £793 in January 2025 and an annual increase of 8.2% from £741 in March 2024. Average rents as of March 2025 in Renfrewshire/Inverclyde by how many bedrooms there are in a property were: • One bedroom: £504 (from £499 in January 25) • Two bedrooms: £670 (from £663 in January 25) • Three bedrooms: £867 (from £858 in January 25) • Four or more bedrooms: £1,533 (from £1,515 in January 25)
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Home ownership 9.2 In general, house prices have continued to rise and ONS figures show that the average cost of a home in Renfrewshire is now £165,000 in February 25, up from £155,000 in February 24. The average price paid by first-time buyers was £122,000, which was lower than the December figure of £127,000, but higher than the previous year’s figure of £117,000. For homes bought with a mortgage, the average house price was £165,000, again a decrease from £171,000 in in December 2024, but higher than the £155,000 paid in February 2024. 9.3 This is less than the Scottish figure, where the average house price in February 2025 was £194,000, up from £182,000 a year earlier. 10 Poverty figures 10.1 On 27 March the Scottish Government published their Poverty and Income Inequality in Scotland report for 2021-2024. This report presents three-year averaged estimates of the proportion of people, children, working-age adults and pensioners in Scotland living in poverty, and other statistics on household income and income inequality. These estimates are used to monitor progress in reducing poverty, child poverty and income inequality. 10.2 The figures showed that: • 23% of children were living in relative poverty after housing costs in 2021-24. Child poverty has been broadly stable in the last decade • 20% of working-age adults were living in relative poverty after housing costs in 2021-24. Working-age poverty is in line with the previous stable trend. • 15% of pensioners were living in relative poverty after housing costs in 2021-24. Pensioner poverty has been stable in recent years.
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• It is estimated that 16% of the population (890,000 people each year) were living in absolute poverty after housing costs in 2021-24. After a long decline since the mid-nineties, absolute poverty rates have remained at similar levels over the last decade. A person is in absolute poverty if their current household income is less than 60% of the UK median in 2010/11, adjusted for inflation • Before housing costs, 15% of the population (820,000 people each year) were in absolute poverty in 2021-24. The trend is similar to the after housing costs measure. 10.3 The report also found that in 2021-24, 84% of the population lived in households with high food security. This means that 16% of people lived in households with marginal, low or very low food security. People in poverty were less likely to experience high food security: just 67% of those in relative poverty, and 68% of those in severe poverty lived in high food security households. People are in severe poverty when their household income is less than half of the UK median income. 10.4 It is estimated that 23% of children (240,000 children each year) were living in relative poverty after housing costs in 2021-24. Before housing costs, it is estimated that 22% of children (220,000 children each year) were in relative poverty. After a long fall between the late nineties and 2010- 13, which slowed briefly just before the 2008/09 recession, child poverty rates rose again. The before-housing costs and after-housing-cost rates appear to have levelled off more recently. 10.5 Furthermore, three quarters of children in poverty live in working households. 10.6 As has previously been reported, children in child poverty priority groups have a higher risk of being in relative poverty.
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10.7 These figures have changed since the previous release. Previous figures showed • Large families - 3 or more children - 32% • Disabled household member - 29% • Youngest in household under 1 - 34% • Minority Ethnic household - 38% • Single Parent household - 38% • Mother under 25 - 55% (current figures are not available) 10.8 The figures also show that most working age adults in poverty are in working households. In 2021-24, 61% of working-age adults (410,000 working-age adults each year) in relative poverty after housing costs were living in a household where someone was in paid work. The share of working-age adults in poverty who lived in working households steadily increased between 2011- 14 (52%) and 2018-21 (62%). However, the reporting period 2019-22 showed a decrease to 57% due to higher economic inactivity as a result of the COVID-19 pandemic. The proportion has since recovered as shown in the figure below.
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10.9 Officers are working to analyse local statistics, and expect the publication of the End Child Poverty Coalition statistics, which break down data by Ward, shortly. This information will be brought to the next Sub-Committee meeting. 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 Manager, diane.dunn@renfrewshire.gov.uk