4 minute read
Barometer 2022
Society adapts in times of war
1. Background: after the pandemic... war
Since the end of the acute coronavirus crisis in late 2021, the pressure on our healthcare system has eased and businesses have slowly been able to reopen. We have regained our freedom and our economy has recovered rapidly, as shown by the 2021 barometer. But since then, we once again find ourselves in crisis mode. Russia’s brutal invasion of Ukraine has sent shockwaves around the world. Not only has a war been started against a sovereign country, but the conflict is also causing economic repercussions for European countries. This war is having a significant impact on households, on the business world and on public finances. It is forcing us to approach energy in a different way and is making the issue of a just transition even more urgent. This barometer attempts to illustrate the impact of this crisis and the responses formulated by the FGTB.
1.1 The price to pay: inflation
The word that keeps cropping up in recent months is “inflation”. Since the summer of 2021, price levels have risen sharply. There are many reasons for the rise in prices in general – and energy prices in particular. The reopening of businesses after lockdown led to a rush on products and services. This increase in demand, combined with supply problems in factories, resulted in an increase in prices. And then Russia invaded Ukraine, causing gas and electricity prices to go through the roof. Added to all this there is also a reason that is often overlooked: according to the European Central Bank, many companies took advantage of the end of the pandemic to raise their prices excessively. This has fuelled inflation.
But the rise in prices is mainly due to higher energy prices. Cutbacks in Russian gas supplies caused by the war in Ukraine are the main reason. In addition, there has been massive speculation on the financial markets. For some months now, energy inflation has been creeping into the production costs of other goods and services. The chart below shows the contribution that each product class has made to overall inflation in the eurozone. Energy remains the main driver of inflation, but food (and the shortage of certain foods) has also made a contribution.
CONTRIBUTION TO OVERALL INFLATION (EUROZONE)
Since mid-May 2022, market prices for gas and electricity have reached record highs (see section 4.2 for a more detailed explanation). The rise in energy prices is reflected in the higher annual bills paid by consumers. The Belgian government has chosen not to cap energy prices, as France has done, for example.
The government has introduced various measures to help reduce bills. These include a heating bonus of €100, a heating oil bonus of €300, a reduction in VAT to 6% and an extension of the social tariff. The social tariff is a reduced energy tariff for certain categories of people (social welfare recipients, beneficiaries of increased BIM benefits). As the graph below shows, the social tariff represents a very important benefit for those on the lowest incomes. The FGTB has recommended that the current system be extended and made permanent. Unfortunately, for some recipients with BIM status, this tariff is not granted automatically. It turns out that the “non-use” rate of those entitled to this status is very high.
We appear to be stuck with high energy inflation. But the tide may soon turn. The Planning Bureau is predicting a return to “more normal” inflation levels during 2023.
Inflation Will Slow Down Until Next Summer
Health Index (base 2013) Consumer Price Index (base 2013)
Source : Planning Bureau, 2022
1.2 Households plunged into energy poverty
Rising prices have a relatively greater effect on the budgets of households with the lowest incomes. When more than 10% of the budget is spent on energy, this is called “energy poverty”. Together, the lowest 25% of income earners spend more than 10% of their budget on energy. Current inflation is therefore having a disastrous impact on their disposable income.
Source: Household budgets survey, 2020
DISTRIBUTION BY TYPE OF HOUSEHOLD – ENERGYL POVERTYTIQUE
The people on the lowest incomes are often tenants of where they live, not owners. Rented houses tend to be less well insulated and so result in higher costs for fuel. Furthermore, energy poverty is relatively more prevalent among people living on their own. Over 60% of the households in energy poverty are single-parent families, although they represent only 35% of all households. Share
Couples with child(ren) Other
Single-parent families
Couples with no children
Source : King Baudouin Foundation, 2022.
Live alone
In Belgium, the percentage of the population aged 16-74 experiencing difficulties or major difficulties in making ends meet increased from 11.7% in the third quarter of 2021 to 16.1% in the second quarter of 2022. If we look at this situation by income category, it is mainly those with the lowest incomes who have the greatest difficulties. Among the 20% of people with the lowest incomes (first income quintile), 34.2% found it difficult or very difficult to make ends meet in the second quarter of 2022 compared with 23.9% in the third quarter of 2021.
Source : Stabel - monitoring of living conditions, 2022.
These figures become more accurate if we add the statistics from the Public Welfare Centers. The coronavirus crisis has considerably increased the (financial) vulnerability of households, with the lowest income categories in particular seeing their savings dry up. This is now compounded by the increase in energy bills. The total number of people requesting monthly assistance from their PWC has increased by more than a third since the beginning of 2020. The increase in demand for food aid is particularly alarming.
These figures become more accurate if we add the statistics from the PCSWs. The coronavirus crisis has considerably increased the (financial) vulnerability of households, with the lowest income categories in particular seeing their savings dry up. This is now compounded by the increase in energy bills. The total number of people requesting monthly assistance from their PCSW has increased by more than a third since the beginning of 2020. The increase in demand for food aid is particularly alarming.
