Never mind better rates, households are struggling to save at all

The cost-of-living crisis has rumbled on for more than a year. But where is the Great British public now, after so much time dealing with soaring living costs?

This is the focus of the latest Money Matters Index from MRM, in partnership with Mouthy Money.

The results of a nationally representative poll of 2,000 18-65-year-olds found tensions building further, but as of yet households are still coping.

Nearly half (47%) say their discretionary income – beyond essential bills – has dropped. Curiously enough, worst hit in this category were hairdressers and chip shops!

Worryingly, more than one in three (36%) say their monthly income is no longer enough to meet their monthly outgoings.

A massive three quarters (75%) say they’ve struggled to save money in the past year or haven’t been able to save at all. This points to growing pressure post-pandemic on the financial cushions households have in place to meet surprise bills and cost increases.

16% of respondents say they’re using credit to meet everyday expenses, even as debt becomes more expensive to maintain as interest rates rise.

The Mouthy Money view from co-editor Edmund Greaves

Britain is at real risk of embedding persistently higher inflation thanks to weak, or even facile, institutional policy responses to the problem.

The Money Matters Index shows Brits are finding it as hard as ever to maintain lifestyles. But as they push harder to gain wage increases this is only going to make the situation worse, and harder for the Bank of England and Government to overcome.

As Chris Tuite points out in the report – are you really willing to accept that you may be poorer?

A few glib words from an MPC member aside, this question is something that vexes households up and down the land. But far from sinking into the abyss, I’d bet people will fight harder to earn more in order to maintain those lifestyles they’ve become accustomed to. This means more and harder pay bargaining.

With debt getting more expensive, this leaves the economy in real danger of stoking a wage-price spiral – something that other major economies such as the US just aren’t experiencing, as variable core inflation figures suggest.

So people earn more money, what’s the upshot of that? When the economy comes back to earth – and the overheating inflation causes guarantees it – it will fall harder, and more people will lose their livelihoods.

We’re being awoken from the zombie economy, maintained for over a decade by aggressively low rates. Once the dead wood begins to ‘fall away’, it’s going to leave behind a trail of destruction.

The Government doesn’t have the answer to these questions. Most recently, it has mooted frankly stupidly thought through ideas such as price caps in supermarkets to quell rising food costs, amid a slew of other half-baked, contradictory, or cringingly political decisions.

Until institutions of the British state stop fiddling while Rome burns, the country will

be nowhere near beating persistently higher inflation and the economic crash dangers that poses for us all.

Find out more and read the full Money Matters Index report