Politics Home | Easing the cost of living crisis: how the government can restore consumer confidence

This latest conflict has already led to rises in fuel prices, the energy price cap will increase in July, and higher food production costs will pass through to consumers later in the year. It is unclear ultimately how much worse off households will be.

We are already seeing evidence of increased financial hardship. The Which? Consumer Insight Tracker, published today, reveals the proportion of households reporting that they missed an essential payment in the previous month increased by 1.7 percentage points between January and April to 7.5 per cent, or one in 13 households.

Energy price shocks are especially harmful for those on lower incomes, who spend a greater share of their expenditure on essentials. The missed payment rate among lower income, non-pensioner households is 13% (more than one in eight).

At the same time there have been sharp falls in consumer confidence. Our data shows consumer confidence in the future UK economy recently plummeted to -62, marking the lowest level since the height of the cost of living crisis. Less than one in ten adults believe the economy will improve over the next twelve months, and 71 per cent anticipate it will worsen.

Low consumer sentiment holds back the economy. It becomes self-fulfilling as those who could afford to spend tighten their purse strings and hold back on discretionary spending.

The political danger of this crisis is equally urgent. Our research shows that 82 per cent of adults feel they are constantly paying more but getting less, and almost three-quarters believe big businesses take advantage of ordinary people. More worryingly for parliamentarians, 68 per cent of adults feel the government is not doing enough to support their standard of living, and a similar proportion are fed up with being ripped off. Voters are rapidly losing faith in Westminster’s ability to change their lives for the better.

So what can the government do?

Which’s Cost of Living Manifesto, launched in Parliament this week, presents a pragmatic, affordable evidence-backed package of proposals that the government could implement quickly.

First, it has to focus on the affordability of essentials. Energy and food prices remain the primary concern for 85 per cent of consumers, and currently one in 13 households reports missing an essential payment every month. While the government cannot control global commodity markets, there are clear fiscal levers that can be pulled.

On energy, the government should build on the steps it took in the last Budget to move the cost of more environmental and social levies, like the remaining 25 per cent of the Renewables Obligation and the Warm Homes Discount, off bills and into general taxation. It’s been estimated this could save typical households between £55 and £145 a year.

At the supermarket checkout, the poorest fifth of households have been forced to cut their real-terms spending on food by 5 per cent. The Healthy Start scheme provides a nutritional safety net during pregnancy and early childhood through weekly payments that can be used to buy nutritious foods, such as fruit, vegetables, infant formula and milk. But despite some increases, the real terms value of these payments has fallen substantially. Uplifting the payments so they  catch up with food price inflation and expanding eligibility to all families on Universal Credit would target support at those families that most need it.

Beyond essentials, the government should do more to stop consumer rip offs and to boost competition. There are a range of policies that the government can enact that could help consumers now and be good for the economic growth that is ultimately needed to boost incomes and fully tackle the cost of living in the longer term.

Top of the list should be action to stop deceptive pricing. Allowing dishonest businesses to get away with marketing misleading offers puts fair-dealing businesses at a disadvantage and it hits the public in their pocket because they buy a product thinking they have a good deal when a better option may be available. The Secretary of State for Business and Trade should explicitly ban firms from using false recommended retail prices (RRPs), ‘was/now’ offers and loyalty promotions using the powers granted in the Digital Markets, Competition and Consumers Act 2024 to make it significantly easier for the Competition and Markets Authority (CMA) and Trading Standards to protect the public.

Next the government needs to get a move on with legislation to sort out markets that are clearly failing consumers, such as the live events sector and the outdated regulatory framework governing the veterinary market. The government has committed to legislating to improve regulation in these markets, but the longer it takes the more consumers will lose out.

Regulators also need to step up. For example, Ofcom should ban discretionary price increases during the minimum term of a customer’s broadband and mobile contract and the FCA could go further on insurance premium finance to address more examples of businesses ripping off consumers.

Finally, some of the biggest failures of competition happen in digital markets. The CMA estimates that Google earned excess profits of at least £3-4bn in 2024 from its general search services in the UK. This means higher advertising costs that are passed through to consumers – some households may be paying hundreds of pounds extra every year because of Google’s market power. The UK has a world-leading, pro-competitive regime for regulating digital markets, but its implementation is too timid.

The government should be proud to stand up for consumers against monopolists and it should give public support to the CMA to use the powers parliament granted it to hold dominant businesses to account.

Which?’s proposals are practical, proportionate, and could be implemented quickly. Government, regulators and businesses all have a role to play in delivering change which consumers will feel in their wallets and restore faith in markets.