What is the Cost Crisis?

You might have heard about the ‘Cost of Living Crisis’ and ‘inflation’ in the news or on social media. We explain what the cost crisis is and how it might affect young people in Scotland and their families.

What is the Cost of Living?

The term ‘cost of living’ is how the level of prices for everyday items is measured. This includes the cost of housing (like rent or a mortgage), food and drink, bills (like gas and electricity) and other essential items.

What is the Cost of Living Crisis or the Cost Crisis?

You may have heard people talk about the term ‘cost of living crisis’ or ‘the cost crisis’ in the news or on social media. The Scottish Government is now starting to refer mostly to this situation as ‘the cost crisis’, and we’ll be referring to it this way.

The cost crisis is about the price of essential items rising faster than the amount of income a house has.

For example, people’s wages or benefits may have stayed the same, but the cost of food, rent, and energy bills have all increased. This can leave households with less money or not able to afford items or pay bills.

Why is there a Cost Crisis?

There are lots of reasons for the current cost crisis, some of the reasons include:

  • The war in Ukraine has impacted supply chains of products like grain, maize and sunflower (used for cooking oil) and Russia has cut supplies of gas to Europe, impacting our energy bills.
  • The COVID-19 pandemic has also impacted demand. During the lockdown, we weren’t spending as much, and businesses were temporarily closed. When restrictions were lifted there was lots of demand all at the same time, this meant there was lots of demand for energy all at once. We also started needing more of the same thing, for example, lots of people started working from home so there was more demand for products like laptops. When there’s more demand, prices start to rise.
  • There are also more job vacancies than there are people to fill the jobs. This means employers are offering higher wages to attract staff, which drives the prices of goods and services up.
  • Climate change is impacting weather patterns around the world, some areas are experiencing drought while other areas are facing floods. This impacts the ability to produce crops and also can impact a country’s ability to produce hydroelectric power as rivers, lakes and reservoirs dry up.

How is the Cost Crisis Affecting People in Scotland?

A study by the Office for National Statistics (ONS) in 2022 has highlighted some of the effects felt by families in Scotland, and the actions they are taking while coping with rising costs:

  • 92% of Scots have seen the cost of their food shop increase
  • 42% of Scots had to spend more than usual to get what food they normally buy
  • 54% of Scots are using less fuel such as gas or electricity at home
  • 88% of Scots have seen their cost of living increase
  • 85% of Scots have seen their electricity bills increase
  • 78% of Scots have seen the cost of fuel increase
  • 44% of Scots don’t think they’ll be able to save any money in the next 12 months
  • 39% of Scots find if difficult to afford their energy bills (very or somewhat difficult)
  • 31% of Scots have seen their rent or mortgage payments go up in the last six months and 25% say they are finding it difficult to afford their payments

View the full report on the ONS’s website.

How is the Cost Crisis Affecting Young People?

In July 2022, we surveyed over 400 young people in Scotland aged 12-25 on their experience of saving, budgeting and spending money as part of our Money and Me campaign in partnership with the Money and Pensions Service.

In the survey, young people highlighted some of their concerns with us. Some of these quotes have been edited for length and clarity.

It’s so disheartening to see the prices rising so rapidly. Families are already struggling enough and this could push a lot of people over the edge.

Inflation is completely eroding my buying power and will make it challenging to go to university in person.

The energy crisis has meant that my family have had to budget and plan better than before.

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