Cost of living 'perfect storm' warning as fuel prices surge to new all time high in wake of Ukraine crisis

The director of a leading poverty charity has called on Chancellor Rishi Sunak to increase benefits in line with inflation to help families cope with the “frightening” spike in energy and food prices that is being exacerbated by the crisis in Ukraine.

The Child Poverty Action Group’s John Dickie warned that the deepening cost of living crisis was “hitting families with nothing to spare the hardest,” and urged the Scottish Government and local authorities to take extra measures to help them “stay afloat.”

The average UK petrol price climbed to a new record high of 151.67p per litre yesterday - up more than 26 pence compared to March 2021 - as Russia’s invasion of Ukraine continued to upturnthe energy markets.

With the price of a barrel of Brent crude oil also surging past £83 - its highest level in nearly eight years - there are growing fears over how many households will be able to cope with the knock-on effects.

The SNP yesterday urged Chancellor Rishi Sunak to “wake up to reality” and ramped up calls for him to introduce an emergency budget to mitigate the crisis.

With Russia and Ukraine key exporters of food and energy, the invasion is compounding a situation which has already left many people struggling to make ends meet amid soaring inflation.

Prices in shops rose at their fastest rate in over a decade in February, according to new figures from the British Retail Consortium (BRC), with the inflation rate for fresh food, which measures how quickly costs for everyday items increase over time, up to 3.3 per cent from 2.9 per cent in January.

Average UK petrol prices have exceeded £1.51 per litre for the first time, deepening the cost of living crisis. Picture: Jacob King/PA Wire

Mr Dickie said: “Soaring energy and food prices are now hitting families with nothing to spare the hardest, and the threat of even higher prices is frightening.

“The number one priority is for the Chancellor to uprate UK benefits in line with inflation - that means at least a seven per cent increase not the 3.1 per cent planned - and he needs to scrap the benefit cap so the increase reaches every family that needs it.”

He added that the Scottish Government should double bridging payments of the Scottish child payment until it is fully rolled out, and said councils should encourage low-income households to take up underclaimed council tax reduction support.

Myles Fitt, financial health spokesman at Citizens’ Advice Scotland, told The Scotsman its advisers were seeing “first-hand” how families were struggling.

“The mitigation measures like furlough and the £20 Universal Credit uplift helped ease the pain for a while, but these have now disappeared and to make matters worse we’re seeing a huge increase in energy bills and other costs of living,” he said.

“This is a perfect storm for vulnerable households in Scotland and many people are going to find it very difficult to cope.”

Despite the pressures already facing households, there are widespread warnings that the worst is yet to come due to events in Ukraine.

At one point yesterday, wholesale gas prices more than doubled to near record levels of 463p per therm, an increase that could feed through to forecourts.

The RAC said that if the higher oil price is sustained, motorists will soon encounter even higher record prices.

“If oil does stay at this level, the journey to an average unleaded price of 155p may be far too quick,” said its fuel spokesman, Simon Williams.

Household energy bills, already set to hike after the annual energy price cap increases to £1,971 in April, are also expected to jump dramatically.

David Cox, an independent energy analyst, said: “Wholesale prices make up between 40 to 50 per cent of household bills. If these high prices stay around 400p per therm we may see the price cap head closer to £3,000 per year, which is terrifying.”

Such stark warnings that bills may more than double - the average combined domestic energy bill in the UK last year was £1,339 - make clear how the devastating scenes in Ukraine threaten to further deepen economic woes for families closer to home.

Although the UK is not reliant on Russia for its oil and gas supplies - imports from that country made up less than four per cent of our total gas supply last year - the fact that Russia accounts for around 40 per cent of Europe’s gas supply has ominous repercussions.

As the wholesale gas spike shows, uncertainties around that supply drive up prices across the entire continent, meaning that consumers in the UK are exposed to the whims of the international markets.

If there is a further tightening of sanctions, or Russia restricts supplies, Europe may turn to reliable sources such as Norway, which provides around a third of the UK’s gas supply - that too would impact on prices here.

Elsewhere, the new BRC data showed that overall shop price annual inflation accelerated to 1.8 per cent last month, up from 1.5 per cent in January - the highest rate of inflation since November 2011.

While food inflation remained the key driver behind the increase, the prices of non-food products, particularly health goods, beauty items, and furniture, also rose sharply..

Mike Watkins, head of retailer and business insight at NielsenIQ, said he expected the prices on the shelves to rise over the next few months.

Alison Thewliss, the SNP’s shadow chancellor, said it was time that Mr Sunak took action to help people deal with the rapid increases in the cost of living.

“The SNP has repeatedly called for the UK government to introduce an emergency budget that delivers a real living wage, reverses the £1,040 cut to Universal Credit, matches the Scottish Government’s game-changing Scottish child payment, and changes his callous energy loan into a more generous grant,” she said.

“This is a clear and feasible plan that would put money in people’s pockets immediately to support them as energy and food costs continue to rise at an alarming pace.”

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