As inflation soars to 41-year high, what can households do to cope?

The surging cost of living is pushing more and more households towards breaking point as soaring fuel bills sent inflation to its highest level in 41 years.Combined with eye-watering price rises across a range of food items, consumers are facing soaring costs at every turn.What lies ahead and what can be done to mitigate price rises and keep households afloat through the crisis?– Why is everything more expensive?Covid-19 has hit global supply chains with a combination of pent-up demand and delays to shipping as factories across the world face lockdowns and worker absences. This has led to prices rising, particularly for raw materials.Food prices have also risen as wages increase, including for HGV drivers due to recent shortages, with thousands of drivers leaving the UK to return to their home countries in the EU.Pressure on food and energy prices is being exacerbated as the full impact of Russia’s invasion of Ukraine and the sanctions against President Vladimir Putin’s regime unfold.Gas and oil prices have been supercharged by the sudden reduction in supply from Russia, one of the world’s biggest exporters for the energy sector.The UN Food and Agriculture Organisation has projected that the conflict will lead to a rise in global food prices in 2022 of between 8% and 22%.– Will inflation remain high?Some economists think the October figure will be the peak, but this is based on some form of Government support with energy bills carrying on beyond April.However, a worst-case scenario has inflation rising as much as 15%.This means more pain is likely to be on the way for household budgets as inflation continues to outpace wage growth, bringing down the real value of incomes across the UK.– Will energy bills get higher and what can I do to cope with them?The jump in inflation – the biggest leap since March to April when Ofgem’s energy price cap was last changed – comes despite the Government energy support, which has sought to limit annual household gas and electricity bills at around £2,500 a year.Chancellor Jeremy Hunt has already said that the Energy Price Guarantee, initially set to last for two years, will be cut from April in order to cost ‘significantly less than planned’.Generally, households are encouraged to aim towards building up a credit balance with their supplier to offset higher prices in winter, although there is widespread concern that the increase in prices, despite Government help, is leading more households into debt. The best option now is to ensure homes are insulated and as energy efficient as possible. The only real way to cut energy costs is to use as little as possible in the first place.– What about food, and how can I reduce the cost of my grocery basket?The rate of inflation across food and non-alcoholic drinks hit 16.4% in October – the highest since September 1977.Families were hit by soaring costs of staple foods, such as milk, cheese and eggs, while there were also hefty hikes across everyday items such as sugar, tomato ketchup and jam.Grocery price inflation is seeing more shoppers turning to cheaper products and supermarket own-brand labels, while customers are also making fewer trips to stores to save on petrol costs.Consumers are advised to think about shopping for own-brand or value grocery products and set a strict, affordable supermarket budget. Supermarket loyalty schemes can help with making savings.Cashback sites, and their welcome offers, can be another way of making household budgets stretch further.– What Government help is coming?Eight million people on low incomes who receive certain benefits will start getting the second instalment of a targeted cost-of-living payment.The £324 payment will be made directly into bank accounts by November 23.A first grant of £326 was paid earlier in the year and, together, they are designed to assist with rising bills.Some eight million pensioner households are receiving £300, while six million on non-means tested disability benefits are receiving £150.All households are receiving £400 divided into monthly instalments to help with energy bills.– What else can I do to avoid the pinch?There is no way around it – households should be thinking carefully about their spending across the board to counter those price rises they cannot control such as energy.A quick look over the monthly bank statement should be a good start.Always shop around and use comparison sites for phone, broadband and insurance rather than just rolling over into the next year to keep charges and premiums at a minimum.Consider whether subscriptions are still useful and providing a good deal – many people signed up to new services during lockdown and may no longer use them as much.The Government-backed MoneyHelper service has budgeting guides at www.moneyhelper.org.uk/en/everyday-money/budgeting