The True Cost Of Inflation

Over the past year we have seen price increases in almost everything, from houses to clothing, but what is the true cost of inflation today and how does it effect us all on a day to day basis.

Since the recession began around August 2007, inflation (CPI) has increased from 1.8% to 4.5% which is an increase of 3.3% in 4 years. This increase along with a reduction in banks lending to businesses has led to more people being made unemployed and struggling to pay their financial obligations.

The increase in inflation has meant that gas and electricity, oil, food and clothing etc have all increased in price which has then further increased inflation.

Recently, all of “the big six” energy companies in the uk announced they will increase their prices in the near future. These changes include;

Energy Companies Average gas Price Increase Average electricity Price Increase
Scottish Power 15.4% 4.5%
Scottish & Southern Energy 18% 11%
Brittish Gas 18% 16%
EDF 15.4% 4.5%
Npower 15.7 7.2
E.ON 3% 9%










All of the energy companies who are increasing their prices have stated it was because of wholesale prices for oil and gas, which has forced them to raise their price tariff.

Food Inflation

In the past year oil prices have risen which has increased the price of food. Current food inflation is 5% and has grown 16% over the past 3 years which is an average increase of 5.6% each year.

Food is a necessity for people to survive, however an increasing number of people are finding it harder to be able to afford both food and heating.

Pay Inflation

In August 2007 the average weekly earnings growth including both bonuses and arrears was 5%, however by Dec 2010 that figure had slowed to 1.3%.

With the price of everything increasing and pay growth slowing down it has led many people to question what the outcome will be and when will the inevitable consequence be paid.

Outcome Of Inflation

The ultimate outcome from the current financial predicament would be a complete collapse of the stock markets however before that there would be a more likely outcome…more people in debt becoming insolvent.

Insolvent is when a person or company is unable to meet their financial obligation and has to enter a debt solution to help them. This debt solution may be bankruptcy or it could be an iva or if in Scotland a trust deed.

If more people were to become insolvent then creditors i.e banks and loan companies will have more bad debt on their books which will then effect their ability to lend more money and help the economy.

Have Your Say…Cut Living Costs

Debt Support Trust have started a cause to cut the cost of living in order to help people manage at least the most essentials necessities liking heating and food. You can join our cause through Facebook and please ask your friends to join as well.