Millions of families are facing a “cost of living catastrophe” due to soaring energy bills and rising taxes, an economic think tank has warned.
The Resolution Foundation said that from next April, families would typically face a £1,200 a year hit to their incomes as the energy price cap is raised and a 1.25 per cent increase in National Insurance Contributions (NIC) comes into effect.
At the same time, the rising inflation forecast set to peak in the spring at 0.6 per cent – means that real pay levels are set to stagnate, with real wages next Christmas no higher than they are this year.
Foundation chief executive Torsten Bell said the “squeeze”on living standards was likely to be so severe that Chancellor Rishi Sunak will come under intense pressure to alleviate the economic pain.
The latest warning comes amid fears among Tory MPs that a new year “cost of living crisis” will further undermine voter support for the government, already badly dented by reports of Downing Street parties in breach of Covid rules.
The foundation said the peak of the “squeeze” looked set to be in April, when the cap on energy firm failures would add another £100 to consumer bills.
The price rise will disproportionately affect low income families who spend more of their income on energy.
The freeze to income tax thresholds and the increase in personal NICs would cost the average household £600 a year.
The foundation also said that real wages, which were flat in October, had almost certainly started to fall and would not pick up again until the last quarter of 2022, leaving real pay just 0.1 per cent higher than it was at the start of the year.
By the end of 2024, real wages would still be £740 a year lower than if Britain’s already sluggish pre-pandemic growth continued.
Shadow work and pensions secretary Jonathan Ashworth said: “Families and pensioners face a devastating new year cost of living crisis, yet Boris Johnson refuses to act.”
A government spokesman said ministers had put in place £4.2billion worth of “decisive action” to help support families with the cost of living.
But let’s be honest about this situation, the simple truth is families are worse off under this Conservative government.
Rodney Sadd
Crowland
Tu delegate for South Holland & The Deepings CLP
