Last spring, retailers thought the tough times were ending.

The Omicron wave was set to give way to a consumer spending boost as we unlocked from pandemic-era restrictions. Yet the conflict in Ukraine intervened and turbocharged inflation, particularly the price of energy and ingredients used in food production.

Soaring prices have shellacked household disposable incomes, with demand across consumer-facing sectors faltering. Scots have had little respite from the cost-of-living squeeze with shop-price inflation now at an 18-year high. The jury is out on whether the rise in shop prices has crested.

Retailers are playing their part in supporting customers by expanding value ranges, fixing prices of some essential goods, and providing discounts for vulnerable groups. However, the sheer weight of costs bearing down on the sector and its supply chain is proving impossible to fully absorb, whilst shopper footfall remains lower than prior to Covid.

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So, what next? Despite a fillip in December because of Christmas-related purchases, consumer confidence is languishing and shows little sign of sustained improvement in the next few months. The second half of the year holds out the prospect of inflationary pressures easing and consumer confidence beginning to return.

However, that seems some time away yet. It is little exaggeration to say that our economy lives and dies by what happens to consumer spending. Government at both UK and Scottish level have acted to curtail domestic energy bills and lift benefits.

Yet disposable incomes will be strained further in the months ahead by a bitter cocktail of elevated energy bills, higher mortgages rates, hikes in council tax, possible new levies, and the freeze in income-tax thresholds.

Taxpayers on modest earnings will be relieved by the decision not to increase Scottish income tax rates from April. However, the freezing of thresholds and increased income-tax rates for higher earners will take a bite out of consumer spending, estimated at £129 million.

Policymakers should be wary about adding further to the burden on household finances, over and above those pressures already planned. The deposit return scheme is being introduced in August, with upfront charges for buying cans and bottles. Longer term, Scottish ministers are legislating for a tourism visitor levy and a charge on coffee cups.

Government choices have increased the pressure on household incomes. However, we do not yet know what approach Scotland’s 32 councils will take over the next few weeks when setting council tax and deciding whether to introduce new levies on parking at work.

An effective and efficient local government is in all our interests. We know councils have been similarly challenged by high inflation and demands for increased wages. Long-term budgetary pressures are causing local authorities to think differently about how and which services they deliver, and how they deploy resources as efficiently as possible.

Maintaining public satisfaction with council services is difficult alongside attempts to cut costs and reinvent the way services are provided. However, councils are striving to rise to the challenge. This fiscal rectitude and support for household finances must continue.

Scots pay £2 billion annually in council tax. The ministerial cap on council tax rises was rescinded last year. The retail industry’s plea is that councils consider the impact of any rises on household discretionary spending. A bumper uplift will dent further consumer spending, which is ultimately critical to economic recovery; councils must keep rises in council tax to a minimum.

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Last year the Scottish Government’s legislation on workplace parking levies came into effect. Councils are now permitted to introduce levies for parking at work. They should think twice about using this new power before the costs crunch has lessened and economic recovery is secured. Firms already pay business rates on the parking spaces they provide for staff. Given the current environment, firms are likely to seek to recoup some or all of any new levy from staff.

The pockets of Scottish consumers and ultimately firms are set to be troubled further in the months to come. We all have a part to play in helping households at this difficult time.

David Lonsdale is director of the Scottish Retail Consortium