The Living Wage Foundation have announced that the new rate for the Real Living Wage will be brought forward from November 2022 to September 2022, due to the surge in inflation and the cost of living crisis.
Real Living Wage
The new rate for the Real Living Wage is normally announced in November each year, and is then implemented with immediate effect. Last year, the new rate for the Real Living Wage increased with effect from the 15th November 2021 by 40p per hour from £9.50 per hour to £9.90 per hour. This means that the Real Living Wage is now £0.40 per hour higher than the current rate for the National Living Wage, that took effect from the 1st April 2022.
Inflation and the Cost of Living Crisis
Since the Real Living Wage increased last November, inflation has surged, indeed tripled, from 3.1% to 9%. Moreover, a cost of living crisis has taken hold, with Russia’s invasion of Ukraine having led to enormous increases in energy, fuel, and food. For instance, the costs of petrol and diesel have rocketed to record levels, with petrol currently costing 174.02p per litre and diesel 183p per litre on average (at the time of writing), both record highs.
The energy price cap also increased on the 1st April 2022, with those on default tariffs paying by direct debit now having to pay £1,971.00 per year, an increase of £693.00 compared with the £1,277.00 they were previously paying. This was partially offset by £350.00 worth of Government support, in the form of a £200.00 energy bills rebate from October 2022, and a £150.00 Council Tax rebate from April 2022 for those households in bands A-D.
Nevertheless, it was proposed at the point that these measures were announced in February 2022, that the Energy Bills Rebate of £200.00 was to ultimately to be recouped over a 5 year period from 2023 at a rate of £40.00 per year, as it was a loan as opposed to a grant.
Moreover, the energy price cap is predicted to increase again in October 2022, with Jonathan Brearley, the chief executive of ofgem, forecasting a further rise of over £800.00, with the average dual fuel bill going up to around £2,800.00. Moreover, given the rate of increase in wholesale prices and the number of supplier failures, ofgem is now looking to change the level of the energy price cap every 3 months from October 2022 onwards, as opposed to current position of every 6 months.
To combat the likely substantial increase in the enregy price cap in October 2022, the Chancellor of the Exchequer, Rishi Sunak, announced further measures on the 26th May 2022, with the energy bills rebate (paid under what is known as the 'Energy Bills Support Scheme') doubling from £200.00 to £400.00, with the rebate being converted from a repayable loan to a grant. Additional measures includes a one-off “cost of living payment” of £650.00 to be paid in two instalments to 8 million households in receipt of welfare benefits, plus a one off “pensioner cost of living payment” of £300.00 to those pensioners who receive the Winter Fuel Payment
In addition to the increases in energy and fuel prices, food prices have also been surging, due to the effects of the Ukraine War. Both Russia and the Ukraine, were exporters of some of the worlds main staple foods, including 53% of sunflower oil and seeds, and 27% of wheat. The disruption to the supplies of these staples has caused food prices to increase sharply, with the rate of increase rising from 3.5% in April to 4.3% in May.
The consequences of all this has meant that last years increase in the Real Living Wage has not kept pace with inflation and the increased cost of living. Hence, the need to review the Real Living Wage.
Rate Change Brought Forward
Given the problems caused by the cost of living crisis and rocketing inflation, the Living Wage Foundation have announced that the new rate for the Real Living Wage will now be announced in September 2022, two months earlier than usual. The new rate for the London Living Wage will also be announced at the same time.
In a statement, the Director of the Living Wage Foundation, Katherine Chapman, said: "The Real Living Wage is the UK’s only wage rate independently calculated to meet the cost of living and, for workers struggling to keep their heads above water as prices surge, it’s more important than ever before. That’s why, with the rate of inflation fast approaching double figures, we are bringing forward the annual announcement of the 2022-23 Living Wage rates to late September."
The fact that the Real Living Wage will be announced early this year means that it will fall outside of this years Living Wage Week in November 2022.
