In recent weeks it has been made clear that the UK’s economic stability is being threatened by inflation, affecting all UK residents, including students. If the issue is not managed sufficiently, it could make daily life in the UK increasingly difficult, especially for those who are either studying or starting out in their careers and trying to keep up with affordable living.
Inflation is the rate that prices are increasing in the economy. If the rate of inflation is too high, it is harder for most consumers to afford basic goods and services, not to mention there is an increase in costs for businesses and other employers.
By the end of 2021, the rate of inflation in the UK shot up to 5.4%, the highest it has been in 30 years. Data is compiled by the Office for National Statistics (ONS) year-round to indicate price levels across the economy using a range of indices, most notably the Consumer Price Index (CPI), from which the above figure is calculated.
This is a problem not just for the wider population of the UK, but also for students at Kingâ€™s. As prices rise, so too does the cost of living. Current students may find it harder to keep up with rent payments and those set for graduation this year may be faced with further difficulties, including once-promising incomes not going as far as in previous years. The main reason for this is that, at present, prices are rising so quickly that the average wage across the economy is not able to keep up with the rapidly rise in price levels.
In terms of life for existing students at Kingâ€™s and other institutions, this sharp rise in prices could be especially detrimental to the living standards of those whose bills are tied to the energy price cap, which will rise along with the inflation rate as fuel and energy prices continue to play a factor in these rising prices. The fact that the UK relies heavily on imports of fuel and energy sources from abroad does not ease the situation by any means.
The outbreak of Covid-19 has certainly played a part in this rise in prices, but a great deal of it is also due to decisions made by the Bank of England and the UK government itself. Whilst the UKâ€™s central bank is responsible for setting interest rates every year – typically done as a means to controlling the inflation rate – this in itself doesnâ€™t resolve the issues that may be driving the inflation rise in the first place. Furthermore, some economists and other experts argue that the current rate of interest (0.25%) is too low to stimulate economic activity in a way that will ease inflation more rapidly.
Rishi Sunak, the current Chancellor of the Exchequer, is under fire from both sides of the political spectrum, not least because of potential social costs that could arise from this rate of inflation, but also because of the UKâ€™s continued reliance on imports of commodities, including fuel and energy sources. It is here that politics becomes a necessary component in shaping the economic situation: does the government take more action to drive productivity and ensure pay is set in line with inflation, or does the UK continue to stagnate, not only economically, but with an entire host of social costs to boot?