Cost-of-living payments next week won’t protect us from runaway prices, say financial advisers

From next Thursday, 8m households on benefits will start getting the first cost-of-living payments - but Hargreaves Lansdown say this won’t be enough.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said: “It’s a vital step in the right direction for those on lower incomes, but it’s a small step back from the precipice after millions of people have edged ever-closer over the past few months.”

Those on lower incomes will get £326 now, and another £324 in the autumn. Aside from the £150 council tax rebate, it’s the first in a series of payments which will also see a £150 top-up for those with disabilities in September, £300 for pensioners expected to be around November, and £400 for all households.

Around one in four households are set to receive payments, as, according to data from the ONS, 91% of people said the cost of living rose in the past month (up from 62% in November), and 78% of people are worried about it. These payments will be delivered directly to energy companies in instalments, between this October and March 2023.

“It’s a positive step for those on the lowest earnings, who’ve been hit three times harder than higher earners by rising prices. However, it’s not enough to put people back where they were before price hikes.”, said Sarah Coles.

“The HL Savings and Resilience Barometer, produced with Oxford Economics, shows that our disposable incomes after inflation have dropped 3% in the past three months.

“While the cost-of-living payments are designed to prevent October’s energy price cap hike from leaving us even worse off, it’s not going to reverse the damage that has already been done. Instead it has been up to us to try to find a way to cut costs.

“The ONS data shows that almost two thirds of people are cutting out luxuries, around a half are using less energy and fuel and spending less on the essentials, while two in five are shopping around more.

“However, the number taking the more extreme step of buying less food has been rising steadily – from just 8% in September to 49%. It goes to show just how desperate the struggle to make ends meet has become for many.”