When inflation hit a 40-year high, it didn’t just squeeze household budgets; it exposed uncomfortable truths about inequality, resilience, and a national culture of financial silence.
The Year Everything Got More Expensive
In the autumn of 2022, UK inflation hit 11.1%, the highest level in more than forty years. Energy bills doubled. Mortgage rates surged following the short-lived Truss government’s disastrous mini-budget. Supermarket prices rose week by week, with staples like pasta, eggs, and cooking oil subject to increases that were, for families on tight budgets, impossible to absorb. Food bank usage hit record levels. The Joseph Rowntree Foundation reported that millions of families were going without heating, skipping meals, and cutting back on essential medicines.
By any conventional measure, Britain was in financial pain. But the cost of living crisis, as it became universally known, was not a single, uniform experience. It was, rather, a crisis that fell very differently on different people, and in doing so, illuminated structural inequalities that had been growing for decades but were easy to ignore when times were, by the standards of recent history, relatively comfortable.
11.1% UK peak inflation rate in October 2022, the highest since 1981
Not Everyone’s Crisis
To understand why the cost of living crisis revealed so much about inequality, it helps to understand what actually drives spending for different income groups. For the lowest-earning households, a disproportionate share of spending goes on essentials: energy, food, and rent. These are precisely the categories that experienced the sharpest price rises. For higher earners, discretionary spending (restaurants, travel, entertainment) makes up a larger portion of outgoings, and these can be cut when necessary. The consequence is that a generalised inflation rate of 11% was, in practice, significantly more painful for those at the bottom of the income distribution than for those at the top.
The Resolution Foundation estimated that by early 2023, effective inflation for the poorest households was running at roughly 17%, well above the headline rate. Meanwhile, research by the Institute for Fiscal Studies showed that households in the top income quintile were, on average, significantly better placed to absorb price rises, having accumulated substantial savings during the pandemic lockdowns of 2020 and 2021. The crisis that dominated political discourse was being experienced very differently across the country’s income spectrum.
“Effective inflation for the poorest households was running at around 17%, well above the headline rate that dominated the news.”
The Savings Divide
One of the most important fault lines exposed by the crisis was the savings divide. The pandemic had an unexpected financial side-effect for those who remained employed: with nowhere to spend money, many households (particularly those in office-based, higher-income jobs) accumulated what economists called a “savings buffer.” The Bank of England estimated that UK households built up around £180 billion in excess savings during 2020 and 2021.
But this buffer was profoundly unequally distributed. It barely existed for essential workers, those in hospitality and retail, the self-employed, and low-income families who were already spending every penny they earned. When the cost of living shock arrived, the households with savings could draw them down. Those without savings had no such cushion. They turned to credit, cut spending on everything non-essential, and in many cases simply went without.
The crisis thus revealed a fundamental truth about financial resilience: the ability to weather economic shocks depends less on income in any given year than on the accumulated financial assets that provide protection when income falls or costs rise. Britain’s household savings rate, which had been low by international standards even before the pandemic, was insufficient to provide meaningful resilience for a large portion of the population.
The Mortgage Crisis Within the Crisis
For homeowners, a group that includes a significant portion of the middle class that might otherwise have been buffered from the sharpest edges of the cost of living squeeze, the sharp rise in interest rates created a separate, devastating pressure. Following the Bank of England’s series of rate rises to combat inflation, millions of homeowners came off cheap fixed-rate deals and faced dramatically higher monthly payments.
UK Finance estimated that around 1.4 million fixed-rate mortgages were due to expire in 2023 alone, with the average household facing an increase of several hundred pounds per month. For families who had stretched themselves to buy during the pandemic-fuelled property boom of 2020–2021, this was catastrophic. The combination of higher mortgage payments, higher food costs, and higher energy bills left some middle-income households experiencing financial pressure that, in degree if not in absolute terms, was comparable to that felt by lower-income renters.
£180bn estimated excess savings accumulated by UK households during 2020–21, but profoundly unequally distributed
What It Revealed About Financial Culture
Beyond the economics, the cost of living crisis forced an uncomfortable conversation about British financial culture, and specifically, the cultural aversion to talking about money. The UK has a long tradition of financial secrecy: salaries are not discussed, debt is a source of shame, and the details of how one manages money are considered deeply private. This silence has real consequences.
When people cannot discuss money openly, they cannot easily compare their situation with others, identify where they are falling behind, or seek help before a difficult situation becomes a crisis. The taboo around discussing financial hardship means that many families in trouble delay seeking support from charities, food banks, or debt advice services because doing so requires acknowledging a failure that the culture insists should be hidden.
The crisis cracked some of that reticence open. Social media, for all its limitations as a forum for nuanced discussion, created spaces where people shared experiences of food bank use, debt, and benefit claims that might previously have been unspeakable. Journalists, politicians, and commentators were confronted with the lived reality of financial hardship in a way that made the usual abstractions harder to sustain. Some of those conversations have been genuinely valuable.
“Britain’s financial culture of silence has real consequences. When people can’t talk about money, they can’t seek help before a difficult situation becomes a crisis.”
The Women at the Sharp End
Research consistently shows that within households, financial hardship falls disproportionately on women. Women are more likely to be primary caregivers, and childcare costs, one of the most significant financial pressures on working families, fall predominantly on mothers. Women are overrepresented in part-time and lower-paid work. And within households facing financial pressure, there is longstanding evidence that women disproportionately absorb the strain: skipping meals so children can eat, avoiding social activities to save money, and carrying the mental load of household financial management even when finances are not in their name.
Single-parent families, around 85% of which are headed by women, faced particular exposure to the cost of living crisis. The combination of sole responsibility for childcare costs, a single income, and less access to the kind of employer benefits that support more financially stable households created a perfect storm of vulnerability that policy responses were slow to address adequately.
What Good Policy Looks Like
The government’s response to the crisis (which included energy price guarantees, cost of living payments, and council tax rebates) provided meaningful support to many, but was criticised by economists and welfare advocates for being inadequately targeted and insufficient in scale. The contrast with some European countries, which took more aggressive steps to support lower-income households, prompted a wider debate about the role of the state in providing financial security.
The longer-term policy questions raised by the crisis (about housing affordability, the inadequacy of benefits, childcare costs, the gender pay gap, and the structure of the benefits system) have not been resolved and, given the pace of political change in the UK, show little sign of imminent resolution. What the crisis did accomplish was to make these questions harder to ignore.
The Legacy
Britain’s cost of living crisis is, in one sense, over: inflation has returned closer to target, and energy prices have fallen from their peaks. But the financial damage done to millions of households (the debt accumulated, the savings depleted, the pensioners who could not heat their homes) will persist for years. And the structural inequalities that made the crisis so unevenly distributed remain entirely intact.
The most valuable legacy of this difficult period may be a slightly more honest conversation about money, inequality, and what genuine financial resilience requires, not just for individuals but as a matter of collective policy. The crisis revealed what Britain actually looks like when financial pressure is applied. The question now is what we choose to do with that knowledge.