Think tanks warn that the cost of living crisis will deepen next year as people continue to be hit by falling wages, higher taxes and higher bills.
Disposable incomes are plummeting even more than in 2022, living standards are “much worse” than they are improving, according to the Resolution Foundation, and households are facing a “groundhog year” for the cost of living. confronting.
This is because wages will remain well below current inflation in 2024, effectively continuing to shrink the wage packet.
Inflation seems to have peakedThis does not mean that prices will fall, only that the increase in prices will be small, and that families will still face very high costs.
“From a cost of living standpoint, 2022 is truly a terrifying year, far worse than any year of the pandemic or financial crisis,” said Torsten Bell, CEO of the Resolution Foundation.
“While we should see double-digit inflation in 2023, this is likely to be the year of the groundhog for many families whose incomes appear to fall as much as in 2022.”
Mr Bell said many families would be helped by a roughly 10% rise next April in both welfare benefits and the national living wage.
But this has been “overwhelmed by shrinking payment packets, a record £900 rise in energy bills, a £1,000 rise in typical household taxes and a four-digit increase in millions’ mortgage bills. will be done,” he said.
“In terms of family living standards, things will get much worse in 2023 before things start to get better.”
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Not only has disposable income recorded its biggest annual decline in a century this year, Collapse of living standards.
Soaring energy prices cost of living crisis – Largely as a result of Russia’s invasion of Ukraine in February, prices of many commodities such as wheat and the prices of producing them burst through the roof.
but experts also pointed out Trade barriers caused by Brexit and the Truss administration’s disastrous mini-budget.
Prime Minister Jeremy Hunt in a statement in the fall Massive tax hike announced to fill £54bn black hole.
According to the Resolution Foundation, which focuses on living standards, the measure will see a jump in personal tax bills of around £1,000 for a typical middle-income household from April.
In addition, household energy spending is expected to increase by £900 to £2,450 in 2023 from £1,550 this year.
This is despite wholesale energy prices falling as retail prices continue to rise and government support is curtailed.
Income is also being squeezed by rising interest rates, which means around 2 million households will move to higher fixed rate mortgages, costing the average mortgage holder £3,000 more a year. takes.
According to a YouGov survey of 10,470 adults commissioned by the Resolution Foundation, people are four times more likely to think their financial situation has gotten worse over the past year than they think it has improved.
The poll also found that low-income households are three times more likely than high-income households to lose confidence in the economy in the next three months.
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The UK is under analysis for further strike action next year as unions representing many sectors call for wage increases to match inflation.
An analysis by the Trade Union Council shows that workers have lost an average of £20,000 in real wages since 2008 as wages have not kept up with inflation, with losses totaling £24,000 by 2025. .
The government has been asked to negotiate to prevent coordinated industrial action, but on Thursday Defense Secretary Ben Wallace said: He argued that there was no “magic wand” to generate money for wage demands.
In response to the Resolution Foundation’s report, the Treasury Department said it had increased child benefits and child tax credits to match inflation and made changes to universal credit.
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The spokesperson added: “We also have plans to ease the financial pressures facing households, keeping inflation in check by more than half next year, and have already lifted millions of people out of taxes completely by raising tax-exempt benefits. Both income tax and national insurance have outpaced inflation since 2010.
“This means that, in addition to the significant cost of living support, this winter’s utility bills have been curtailed and over 8 million vulnerable households have received a cash payment of £1,200 directly to their bank accounts, helping everyone benefit. People on means-tested benefits are $900 next year.”
