13th August 2026
The Hidden Cost of the Cost-of-Living Crisis: How Britain's Poorer Families Have Changed What They Eat and How They Use Energy
There is a dangerous misunderstanding about the cost-of-living crisis.
When inflation falls, we are often told that the pressure on households is easing. Economically, that is true in one very narrow sense. But for millions of families, falling inflation does not mean that food, electricity, heating and other essentials have become cheaper.
It simply means that they are becoming more expensive at a slower rate.
That distinction matters enormously.
A family that saw the price of a basket of groceries rise from £100 to £120 during the inflation shock has not returned to the old position simply because inflation subsequently falls. If prices then rise by another 2%, that £120 basket becomes £122.40.
The inflation rate has fallen dramatically from the peak, but the household is still paying substantially more than it was before the crisis.
And evidence is emerging that this prolonged period of higher prices has changed the way many people live.
The cost-of-living crisis has changed behaviour
The obvious way to measure the crisis is through household bills.
But another way is to look at what people have stopped doing.
Are they buying the same food?
Are they heating the same rooms?
Are they cooking in the same way?
Are they buying the same quality of meat?
Are they turning the heating down?
Are they delaying purchases?
Are they simply going without?
These questions reveal something that headline inflation statistics cannot easily show: people adapt to high prices, and some of those adaptations can become permanent.
The Government's Family Food analysis provides particularly useful evidence.
It found that in the financial year ending March 2024, the poorest fifth of households spent 5% less on food in real terms than the previous year, despite spending 5% more in cash terms.
That means they were paying more but receiving less purchasing power.
The Government concluded that poorer households were either consuming less or switching to lower-cost or lower-quality alternatives.
That is perhaps one of the clearest descriptions of the hidden cost of inflation.
Food has become a bigger problem for poorer households
The average household spent 11.3% of its expenditure on household food and non-alcoholic drinks in FYE 2024.
For the poorest 20%, the proportion was 14.3%.
That difference may not sound enormous, but it represents a fundamental difference in financial flexibility.
A wealthier household can absorb an increase in the price of food by cutting back on holidays, entertainment, savings or other discretionary spending.
A household already spending most of its income on essentials has far fewer choices.
Food is not optional.
Neither is heating.
Neither is electricity.
Neither is transport for someone who needs to get to work.
That is why inflation is not socially neutral.
Meat is a good example
Meat provides an excellent illustration of how households adapt.
When the price of beef, lamb or other meat rises sharply, a household with plenty of disposable income can simply absorb the increase.
A household operating close to its financial limit has other choices.
It might:
buy meat less frequently;
buy cheaper cuts;
buy smaller quantities;
replace fresh meat with cheaper alternatives;
buy more processed foods;
make meals stretch further with pasta, rice, potatoes or pulses;
or remove some foods from the shopping basket altogether.
None of these decisions necessarily appears in the headline inflation figure.
But they can have consequences for nutrition and health.
The Government's Family Food figures show precisely this broader behavioural response: the products purchased change when relative prices change.
That is the hidden economy taking place inside millions of kitchens.
Energy creates another set of choices
The same thing has happened with energy.
When electricity and heating costs rose sharply, households did not simply receive larger bills.
They changed their behaviour.
Ofgem's research found that in early 2024, 26% of households had reduced spending on necessities such as food because of the cost of energy.
That is a remarkable statistic.
It means that for more than one household in four surveyed, the energy crisis had become a food-budget problem.
And there is another side to the equation.
People reduced their energy use by:
heating fewer rooms;
turning thermostats down;
heating homes for shorter periods;
using appliances less;
changing cooking habits;
reducing hot-water use;
or simply accepting colder homes.
The important point is that people were not necessarily becoming more energy efficient.
Some were simply using less because they could not afford to use more.
There is a very large difference between those two things.
The poorest households have the least room to manoeuvre
This is why the cost-of-living crisis should not be judged simply by looking at the national inflation rate.
Consider two households.
Household A has £5,000 a month coming in after tax.
Household B has £1,800.
If essential household costs rise by £200 a month, Household A may have to reduce savings or discretionary spending.
Household B may have to reduce food, heating or transport.
The same percentage increase therefore produces very different consequences.
That is why inflation can be particularly damaging to low-income households even when the headline inflation rate is exactly the same for everybody.
Falling inflation is not falling prices
This is perhaps the most important lesson from the entire crisis.
Suppose the price of something is £100.
Year one: inflation of 10% → £110.
Year two: inflation of 8% → £118.80.
Year three: inflation of 4% → £123.55.
Year four: inflation falls to 2% → £126.02.
Inflation has fallen enormously.
But the price has risen from £100 to £126.
That is a 26% increase in the price level, despite inflation eventually falling to just 2%.
This is why people can quite reasonably say:
"They keep telling me inflation is falling, but my shopping is still getting more expensive."
Both statements can be true.
Inflation measures the rate at which prices are changing.
It does not tell us that prices have returned to where they were before the inflation shock.
Britain is now living with the legacy of the inflation shock
This matters particularly in 2026.
UK inflation fell to 2.6% in June, down from 2.8% in May.
Food inflation has also eased considerably. By June 2026, food and non-alcoholic beverage prices were rising at just 1.7% annually, according to recent analysis.
That is welcome news.
But it does not erase the previous increases.
Indeed, Britain's food industry is still dealing with prices and costs that remain substantially higher than they were when the cost-of-living crisis began in 2021.
The crisis has therefore changed from an inflation crisis into something rather different:
a higher-price economy.
That may be an even bigger long-term problem for some households.
The danger is that temporary sacrifices become permanent
There is another issue that deserves much more attention.
People can change their behaviour for a year or two and then return to normal.
But what happens when the behaviour continues for four or five years?
A family that stopped buying certain foods in 2022 may have changed its normal diet.
Someone who began heating only the living room may continue doing so.
A household that stopped replacing appliances may continue repairing them.
Parents who learned to make cheaper meals may continue doing so because they have discovered that there is no longer any financial margin to return to their previous lifestyle.
In other words, the cost-of-living crisis may have permanently changed consumption patterns.
And Scotland deserves particular attention
This should not be viewed simply as an English or London problem.
The effect can be particularly important in rural Scotland.
In places such as Caithness and the Highlands, households can face additional pressures from distance, transport costs, limited public transport, housing characteristics and, in some areas, the absence of mains gas.
A household cannot necessarily respond to expensive petrol by taking a train.
It cannot necessarily respond to expensive electricity by switching to mains gas.
And a rural family may have fewer opportunities to shop around between competing supermarkets.
The national inflation figure therefore does not necessarily describe the inflation actually experienced by every household.
The real question is not "Has inflation fallen?"
The more useful questions are:
What are prices compared with five years ago?
How much of household income is now needed to buy essentials?
What have families stopped buying?
What foods have disappeared from shopping baskets?
How much energy are people no longer using?
And perhaps most importantly:
What happens to people's health and quality of life when these changes persist for years?
Those questions take us beyond the monthly inflation announcement and into the real consequences of the cost-of-living crisis.
The hidden bill may only be appearing now
Britain may have escaped the worst of the inflation shock.
But that does not mean the cost-of-living crisis is over.
For many households, the legacy is a permanently higher price level, reduced financial resilience and a collection of behavioural changes adopted simply to make the household budget balance.
The poorest households have had to make the biggest adjustments because they had the least room to absorb higher prices in the first place.
And that leaves us with a rather uncomfortable conclusion.
Falling inflation tells us that the fire is burning less fiercely. It does not tell us that the damage caused by the fire has been repaired.
For millions of families, the shopping basket has changed, the way they heat their homes has changed, the way they cook has changed and the amount of money left at the end of the month has changed.
The inflation rate may be falling.
But the price of the life they were living before the crisis has not come back.