No matter what we do for a living or where we live, many of us want pretty similar things: a warm home, knowing that our family and friends are safe, and the assurance that we will be able to cope with whatever life has in store. But as the rising cost of living bites into living standards, these ideals feel more out of reach. Not only do one in six people now rely on a food bank, but last month the Prime Minister was informed of the case of Elsie, a pensioner forced to ride the bus all day to stay warm because she couldn’t afford to heat her home.

The government have responded in part to the growing gap between incomes and the cost of living, announcing three packages of support primarily to address escalating energy bills. First, households were offered a partial £150 council tax rebate and a £200 energy bill loan in February. Second, at the spring statement in March, the chancellor, who had introduced a rise to national insurance (NI) rates only six months before, announced that the threshold at which earners begin to pay NI would rise to the same level as income tax.

But neither of these interventions made use of the social security system, so neither targeted support to those households most in need. That is why the third support package announced last month was welcomed by left- and right-wing organisations as well as the anti-poverty sector. Alongside the expanded energy bill rebate (increased to £400, and converted from a loan into a grant), and the £300 one-off payment targeted at pensioners, families in receipt of means-tested benefits will receive an additional £650, and people getting disability benefits will get a further £150. This will be crucial to easing further hardship this winter, when the energy price cap is expected to rise by a further £800 to £2,800 a year. It could however rise further next January: Cornwall Insight predict the price cap will reach £3,000 by the new year.

Despite help from the government, the highest level of inflation in 40 years is forcing households across the country to cut back on their weekly shop and go without other essentials. We’ve produced new analysis which indicates that, come October, the bottom 75% of households will have seen the cost of living outpace their income since April 2021, on average.For the poorest households, many of whom will have already tightened their belts as far as possible, the cost of living between April 2021 and October 2022 will have increased by over 10 percentage points faster than their incomes (figure 1). In other words, the combined impact of all of the government’s one-off cost of living support is not enough to avoid a drop in living standards for the poorest quarter of households: they need 1.5 times more support than what they have been offered.

To measure the cost of living, we use the minimum income standard (MIS) as calculated by Loughborough University’s Centre for Research in Social Policy. Household budgets for different family types are calculated based on what the public thinks is needed for an acceptable standard of living. To estimate a household’s MIS in October 2022 and April 2023, we have applied inflation forecasts from the monetary policy committee’s May report to this basket of goods. Since then the Bank of England has increased its October inflation estimate to 11%. To enable fairer comparisons to the MIS, household income is grossed at the household level.

Figure 1: Three in four households cannot cover rising costs