Households are facing an average of £ 1,200 on their incomes from the double inhibition of rising energy bills and taxes, a think tank has said.
The Resolution Foundation (RF) says families face a “cost of living disaster” when the energy price ceiling is rising and National Insurance Contributions (NICs) are rising by 1.25 percentage points in April.
At the same time, there is rising inflation – which is expected to peak by 6% in the spring – which means that incomes are about to stagnate.
The fund’s chief executive, Torsten Bell, said Chancellor Rishi Sunak is likely to come under pressure to act.
Labour’s shadow shadow for work and retirement, Jonathan Ashworth, told Sky News the blame lay with the Conservative government.
He said: “Working people, families, retirees are facing a devastating cost of living crisis. That is because we have had 11 years of Tory economic failure. We now have a low growth, high tax economy.
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“What that means … are the heating bills skyrocketing, the prices in the shops rising because we’ve got inflation back, which also erodes savings and pensions, and of course we have these punitive tax increases on the way and wages stagnate and there are things like universal credit being cut down, meaning families are struggling to make ends meet, even when working all the hours God sends.
“As this think tank report has shown today, people are going to pay hundreds of pounds extra in energy bills, Boris Johnson is nowhere to be seen.
“We suggest, as other European countries do, to take the VAT off these fuel bills, to get us through this crisis, and do other things like not go ahead with the punitive tax increase, pay people a proper national wage, because otherwise it will be a year of squeezing. “
What does the Resolution Foundation say?
The Resolution Foundation said the ceiling on energy bills is expected to rise by around £ 500 a year, while the cost of energy company failures could add another £ 100 to consumer bills.
These additional costs will disproportionately affect low-income families who spend more of their income on energy.
Meanwhile, the RF said the freeze on income tax limits and the 1.25 percentage point increase on personal National insurance Contributions would cause people to lose an average of £ 600 a year.
The RF said it predicts wage increases will not keep pace with inflation, so the average real wage in the last three months of 2022 will be only 0.1% higher than it was at the beginning of the year.
By the end of 2024, real wages will be £ 740 a year lower than if the pandemic had not taken place, RF said.
Last month, it was announced The consumer price index for inflation had risen to 5.1% in November from 4.2% in October.
‘Cost of living disaster’
Torsten Bell added: “The overall picture is likely to be one of rising prices and stagnant wage packages.
“The peak of the pressure will be in April, when families face an income of £ 1,200 from sky-high energy bills and tax increases.
“So great is this cost-of-living disaster that it’s hard to see how the government avoids stepping in.”
Some Tory MPs fear rising costs for households will undermine voter support for a government already hard hit reports of Downing Street parties in violation of the COVID rules.
What does the government say?
A government spokesman said it had launched a £ 4.2bn “decisive action” to help families.
This includes reducing Universal Credit taper – as the government says is worth more than £ 2 billion – the energy price cap, cold weather payments and the freezing tax on alcohol and fuel.