- Housing costs are adding most pressure in cities due to high private rents and large numbers of recent mortgage borrowers with high mortgage burdens
- Remote communities across the nations hit hardest by higher fuel poverty rates; low pay in small Welsh towns and villages; high food costs in Scotland’s remote and island communities
- Thinktank CPP calls for better data collection, more flexible local funding and more consideration by UK government on how Whitehall crisis support impacts different places
A new report by economics thinktank the Centre for Progressive Policy examines the varied impact of the cost of living crisis across Scotland, Wales and Northern Ireland.
The report finds that high housing costs are adding pressure in cities across the three nations. Private rents are equivalent to 39.7% of median take-home pay in Midlothian; 34.5% in Glasgow; and 31.3% in the City of Edinburgh. In Wales, renters on low incomes face particular challenges: a recent report by the Bevan Foundation found that there is a severe shortage of properties available to rent at Local Housing Allowance (LHA) rates in Wales.3 Northern Ireland’s rental market has become the most overheated of the four nations of the UK: private rents rose by 9.9% between March 2022-March 2023.
Large numbers of households in cities in Scotland and Wales have high mortgage burdens, a concern as interest rates continue to rise. Recent analysis shows the number of households with recent mortgages that are four or more times the size of their income.
In Scotland, Edinburgh is most susceptible to this financial strain, with 32.7% (or 4,423 households) of mortgages taken out between 2018 and 2021 having ratios four times their income. In Wales, Cardiff, is the area most exposed to this trend, with 29.7% of all recent mortgage-borrowers, or 3,742 households, in this position. In Northern Ireland, data is only available for Belfast, where 15% of mortgages taken out in this period have high loan-to-value ratios, equivalent to 3,042 households.
Remote communities across the three nations are more vulnerable to fuel poverty. The three areas of Scotland with the highest rates of fuel poverty are Na h-Eileanan Siar (39.8%), Highland (32.9%), and Argyll and Bute (32.2%), all areas with mostly remote populations. In Wales, areas where most of the population live in small towns or villages have the highest rates of fuel poverty. Gwynedd and Ceredigion have the highest rates of 23% and 21% respectively. The most recently available data for Wales is from 2017-18, meaning it is difficult to get an up-to-date picture of the impact of the crisis.
In the absence of official statistics in Northern Ireland, in 2022 the fuel poverty charity National Energy Action (NEA) estimated that around 45% of households were living in fuel poverty - more than double the 22% figure from 2016. Most areas outside of Belfast are not connected to the electricity grid: an estimated 68% of the population depends on heating oil to power their homes, rising to 82% in rural areas. The Energy Price Cap has never been applicable to Northern Ireland, and heating oil trades within a completely unregulated market which spiked long before the Energy Price Cap neared its peak.
With UK food inflation now at 18.4% year on year, remote rural and island communities in Scotland are particularly exposed to higher food prices, which are compounded by the additional costs of transporting food. A previous study revealed that pre-crisis, weekly food costs in remote rural areas on the Scottish mainland and Scottish Islands were already 2-4% and 5-13% higher respectively than in urban UK areas, depending on household size.
The prevalence of low paid work leaves many Welsh communities exposed to the impact of rising prices. Across the Isle of Anglesey, Powys and Pembrokeshire, 17% of local jobs are low paid, which is the joint highest across all Welsh authorities. Medium sized towns in Wales had higher rates of food insecurity going into the crisis (2021), with Merthyr Tydfill a particular outlier with a very high rate of food insecurity of 27.97%.
Northern Ireland has been hit particularly hard by rising living costs: a record 129,710 households are now receiving universal credit (UC), a figure which has more than doubled since 2020. The number of households receiving support for housing costs has tripled since the end of 2019, and now encompasses roughly one in six households, rising to one in four in the private rented sector.
In response to the crisis, last year, the Scottish Government spent £351m on council tax reductions but did not allocate funding to local authorities to use at their own discretion. The Welsh Government introduced a £152m package of measures, but just 16% (£25m) of this was discretionary funding for councils to allocate themselves, while the remainder was for council tax relief. The absence of a functioning government in Northern Ireland means that it is the only part of the UK to have lacked a proper policy response to the cost of living crisis. A lack of governance and available data has contributed to the lack of resilience to rising prices and economic shocks. Northern Ireland’s Fuel Poverty Strategy is over a decade old, having been published in 2011, while local area fuel poverty statistics have not been published since 2016.
CPP is calling on the devolved governments of Wales, Scotland and Northern Ireland to provide more discretionary funding for councils, similar to the Household Support Fund available to English local authorities, to spend as they judge best to support their residents.
CPP also calls for better national data collection and legislation to improve data sharing by councils and other local partners during moments of crisis. It also recommends the UK government conducts geographic analyses to measure the impact of crisis policy interventions, to ensure they provide adequate support that meets the needs of different communities.
Ross Mudie, Research Analyst at CPP and report author, said:
“Rising living costs are adding pressure to virtually all households in the devolved nations, but our analysis reveals significantly different pressures in different places within them.
“Households in large cities across the three nations are more likely to face pressure from high housing costs, both private renters and those with recent mortgages being particularly at risk. For remote and rural communities, fuel poverty is a significant threat, particularly for those households in Scotland and Northern Ireland that rely on heating fuel. Remote island communities in Scotland are particularly exposed to the current high rate of food inflation, as they already face significantly higher food costs. High rates of fuel poverty and low pay in small Welsh towns and villages leaves those communities exposed – although a lack of recent data makes this difficult to pinpoint.
“Local authorities know their communities best and the UK and devolved governments alike must give them the funding and flexibility to target future support where it is most needed. They must also urgently update local area poverty statistics, so that local and national policy can better understand and respond to the situation on the ground.”