The challenges facing living standards in the UK have intensified, significantly affecting the political landscape. Recent increases in utility bills, including an anticipated rise in water bills and a higher energy price cap of £1,755 per year, have added to the financial strain on households. Some political groups have attributed this cost of living crisis to external factors like the war in Ukraine or climate change, though there are indications that domestic economic structures also play a crucial role.
The UK’s economic framework may exacerbate the impacts of inflation, leading to higher costs for essential services. Analysis by Common Wealth suggests that a sizeable portion of energy bills, estimated at around £416 per household annually in 2024, is profit. This trend extends to other utilities, with about one-third of average water bills going toward dividends and interest payments. The rail sector similarly redistributes over 100% of its post-tax profits to shareholders while relying heavily on government subsidies.
The current cost-of-living crisis also reflects political decisions regarding the organization of basic necessities, suggesting that households are facing a “privatization premium.” Estimates indicate that nearly £200 billion has been paid in dividends to shareholders of privatized water, energy, and transport companies since the 1990s. This premium imposes a hidden financial burden on consumers, disproportionately affecting lower-income households.
Examples like Greater Manchester’s public bus network, which has seen costs reduced after a shift to public control, highlight potential alternatives. However, the UK government faces challenges in navigating relationships with corporations that benefit from current market conditions while needing their support for infrastructure and housing investments.
Rethinking the privatization of essential services could allow for more efficient consumer pricing and potentially lower inflation. Although taxes might need to be revised, a progressive taxation system could alleviate the burden on lower-income households while ensuring that services remain accessible and affordable. Addressing these systemic issues is critical for improving living standards and addressing the political consequences that may arise if left unchallenged.
Source: https://www.theguardian.com/commentisfree/2025/oct/14/bills-reform-labour-cost-of-living-britain