The punishing price of essentials as Brits experience 'comfort crunch'

Millions of hard-pressed families are suffering a 'comfort crunch' as rising energy bills and everyday costs eat up nearly half their disposable income.

A study by the Resolution Foundation reveals that low and middle-income households are being forced to divert more of their earnings into essentials like food, clothing, transport, and utilities, leaving less for holidays, meals out and other life pleasures.

The biggest culprit is energy costs - which are now 150% higher in real terms than in 2000 - with annual bills more than £2,000 despite households cutting back.

The report, The Bare Necessities, highlights that across the poorest half of working-age households, essential spending now swallows 49% of their non-housing budgets, up from 42 per cent in 2002.

Among better-off families, the rise has been more modest - from 37-41% - exposing how Britain's poorest are being hit hardest by the ongoing squeeze.

While the price of some basics has fallen - clothes are down 37% in real terms since the financial crash and food is 11% cheaper than the OECD average - gas and electricity costs have surged.

Prices for energy doubled between 2000 and 2019, then spiked another 71% through the cost of living crisis. Bills peaked at £2,051 in 2023 - up from £1,200 just four years earlier - despite many households using less.

The result has been a dramatic rise in energy debt, which has more than doubled in real terms to £3.9 billion since 2019, according to the research funded by JPMorgan Chase.

The foundation is now urging ministers to introduce a targeted 'social tariff' on gas and electricity - offering automatic discounts to struggling families based on both income and usage.

The proposal would offer a 10% discount to the poorest two-fifths of households in England and Wales - costing £1.6 billion, the same as this year's Winter Fuel Payments but far more targeted.

The scheme could then be scaled up if prices spike again, offering a more efficient and fair alternative to the blanket £37 billion in subsidies handed out during the last crisis.

Lalitha Try, Economist at the Resolution Foundation, said: "The poorest half of working-age families across Britain are now spending half of their budgets outside of housing on essentials like food, petrol, utility bills and clothing.

"This has created a 'comfort crunch' as families have less left over for the more fun things in life like eating out, leisure activities and holidays.

"This 'comfort crunch' has happened despite the cost of some essentials being kept low. Food in Britain is still cheap by international standards, and the cost of clothing has fallen by a third.

"The big exception has been energy costs, which rose gradually during the 2000s and 2010s and then much more quickly during the cost of living crisis.

"Ministers can better protect households from these energy price pressures by providing a discount for those on low incomes that goes beyond those on means-tested benefits. Such a scheme needn't cost much in normal times, but could be ramped up if another energy price shock comes around."