The rate of inflation reached unprecedented levels of 9.1% in May; the highest rate in 40 years. The ‘cost of living crisis’ refers to the fall in disposable incomes that the UK has experienced since late 2021. It is being caused primarily by high inflation overtaking wage and benefit increases and has been further worsened by recent tax increases.

The Bank of England has forecast inflation peaking at 10.2% in the Winter of 2022. This is largely driven by the £693, or 54%, increase from 1 April of the energy price cap and a forecasted further increase of 40% in October. Inflation is expected to remain high for the next two years: the Bank expects that inflation will not reach its 2% target until the Autumn of 2024.

Priority debts

Non-Priority debts

  • Rent arrears

  • Mortgage arrears or secured loan arrears

  • Council tax arrears

  • Gas or electricity bills

  • Phone or internet bills

  • TV licence payments

  • Court fines

  • Overpaid tax credits

  • Payments for goods bought on hire purchase or conditional sale

  • Unpaid income tax, National Insurance or VAT

  • Unpaid child maintenance

  • Credit card or store card debts

  • Catalogue debts

  • Unsecured loans including payday loans

  • Unpaid water bills - your supplier can’t cut off your water supply

  • Overpayments of benefits - apart from tax credits

  • Unpaid parking tickets (Penalty Charge Notices or Parking Charge Notices)

  • Money you owe to family and friends