Labour swept to power in the wake of a cost of living crisis that hit households hard, with the price of food and energy rocketing alongside the impact of Liz Truss’s disastrous mini-budget on mortgage rates. At 2.3%, inflation is nowhere the 10% peak after Russia’s invasion of Ukraine, but it is creeping up, and could hit 3% in 2025, say forecasters. Here are some of the pressures households are likely to face in the coming months at a time when the government claims to be “fixing the foundations” of the economy. Energy prices Ofgem announced its latest price cap on Friday morning, with average energy bills to increase by 1.2% from January, to £1,738 a year. The forecasters Cornwall Insight say the cap is likely to come back down again in April, by a modest 1.4% – but that will make little difference for households struggling to make ends meet over the winter. Mindful of the backlash over the cutting of the winter fuel payment for most pensioners, ministers have persuaded the energy sector to set aside £500m for this winter to cushion the blow for some of the hardest hit households – including by writing off debts for some. But Citizens Advice, which advises cash-strapped consumers, said the total energy debt owed by households to their suppliers is now £3.7bn – and called for direct support from the government. “Without government action, millions are at risk of being left in the cold this winter and beyond,” said its head of energy policy, Alex Belsham-Harris. Even comfortably-off consumers may note that while utility bills are no longer rocketing, they remain a good 40% higher than the £1,200 a year or so they were before the Ukraine war. And with geopolitical uncertainty high, as Donald Trump prepares to arrive in the White House, energy prices are not expected to return to those levels any time soon. Housing costs The cost of fixed-rate mortgage deals has been creeping up in recent weeks, and the bigger than expected rise in inflation in October has fuelled expectations that lenders will continue to increase rates. That is unwelcome news for would-be homebuyers who want the security offered by a fixed rate, as well as anyone whose existing mortgage deal is coming to an end. The financial data provider Moneyfacts reported that the average new five-year deal was 5.26% on Thursday – compared with 5.09% on the morning of the budget on 30 October. That means someone who took out a £200,000 five-year fixed mortgage on Thursday is paying £20 a month – or £240 a year – more than if they had signed up for an equivalent deal a few hours before Rachel Reeves set out her budget. Rents have been increasing sharply too. The latest Office for National Statistics (ONS) data showed an 8.7% jump in average rents across the UK over the past year – a rise of more than £100 a month. The £25bn increase in employer NICs There is growing concern that the increase in employer national insurance contributions (NICs) next April will raise prices in the shops, hold back wages and hiring and potentially dent economic growth. Labour plans to raise £25bn from a 1.2% increase in employer NICs and a cut in the salary threshold when employers first start contributing, from £9,100 to £5,000. If businesses are able to pass on the costs, it could lead to job cuts and higher prices. Retailers have warned of a £7bn increase in annual costs.The Office for Budget Responsibility (OBR), the Treasury’s independent forecaster, estimates that workers will bear about 60% of the NICs increase initially, rising to 76% in the medium term. Those businesses able to offload some of the cost to consumers in higher prices will push up inflation, potentially persuading the Bank of England to keep interest rates higher for longer. The BoE’s latest forecasts, released three weeks ago, suggested the budget would raise inflation by half a percentage point at its peak, based on the impact being split across prices, profit margins, workforce levels and wages. Donald Trump’s trade policies Evidence is emerging that Donald Trump will have a cabinet full of loyalists who will cheer him on as he imposes tariffs on US imports. Within hours of taking office in January next year, the next president can use executive powers to raise tariffs and rely on Republican majorities in the Senate and House of Representatives to back him up. Higher tariffs increase the cost of imported goods. China is the focus. Experts expect the tariffs to be phased in over four to six months. The delay will allow Trump to make demands on trading partners in exchange for more lenient treatment. The UK and mainland Europe are expected to avoid the 60% tariffs imposed on China, but could still find their exports to the US hit by 10% or even 20% tariffs. Some of the impact of the tariffs on US consumers could be mitigated if the dollar appreciates against other currencies as a result of the policy, as many economists expect; but a weaker pound would be tough for UK consumers, driving up the cost of imported goods and raising inflation. Research by Dr Aurélien Saussay for the Grantham Institute, which researches the climate crisis and environment, showed extra tariffs would rebound first on the US, cutting gross domestic product (GDP) by -0.64%, before hitting the Chinese economy with a 0.68% reduction, and the EU with a more modest -0.11% fall. Food Surging food prices were one of the key factors driving inflation through 2022 and 2023, as well as one of the most visible signals to consumers of the cost of living crisis. At one point, the annual inflation rate for food products was an extraordinary 19%, hitting shoppers hard every time they filled up a basket. The latest ONS data showed food price inflation is now a much more manageable 1.9% a year; but it has not dipped below zero, which would herald falling prices, so spending a lot more on the weekly shop has become a new normal. Food prices are expected to become more volatile because of the climate crisis, with more extreme weather and substantial shifts in seasonal patterns. These can lead to spikes in the price of individual products, with olive oil and cocoa being recent examples, or across-the-board increases, when weather patterns are out of kilter with historic norms.