Skip to main content

Millions to be pushed into poverty by soaring food and energy costs, think tank warns

12.5 million people will soon be unable to afford basic necessities, the Resolution Foundation says

MILLIONS of households will be pushed into poverty by soaring food and energy costs, a think tank warned today, as forecasts reveal a record drop in living standards.

The Resolution Foundation think tank said that 12.5 million people will soon be unable to afford basic necessities.

Typical working-age household incomes are set to fall by 4 per cent in real-terms in 2022-23, a loss of £1,100, while the largest falls will be among the poorest quarter of households where incomes are set to fall by 6 per cent, the think tank said.

The analysis showed that the lack of support offered by Chancellor Rishi Sunak for low-income families in his Spring Statement means 1.3 million people will fall into absolute poverty in 2022-23 — the first time Britain has seen such an increase outside of a recession.

Resolution Foundation chief executive Torsten Bell said that Mr Sunak “has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living.

“It means we’re all getting worse off, and at the bottom end you’re having to cut essentials because you don’t have lots of luxury spending to forgo in the first place. That is really serious.”

Mr Bell added that the Chancellor’s “policies do not measure up to the rhetoric,” as their analysis indicated that even with the raising of the National Insurance threshold from July and the promised 1p cut in the basic rate of income tax in 2024, about 27 million of the 31 million British people in work will pay more in income tax and National Insurance in 2024-25.

This follows the gloomy outlook by the government’s own forecasters, the Office for Budget Responsibility (OBR), which said that UK households faced the biggest drop in living standards since records began, in the 1950s.

The OBR said that wages are failing to keep up with prices as rapidly rising energy costs push inflation towards 9 per cent, its highest level in 40 years, and higher energy bills will lead to further inflation, which in turn will put pressure on household consumption and erode incomes.

Coupled with rising taxes, this fall in spending power will lead to a 2.2 per cent fall in living standards — the largest drop on record.

As a result, living standards will not recover to their pre-pandemic levels until 2024-25, the OBR added.

Institute for Fiscal Studies director Paul Johnson said that the measures announced by Mr Sunak “will still not be enough to protect poorer households from a significant hit to their living standards.”

Analysis by the institute shows this year’s near 3 per cent decline in real pay is the steepest since the late 1970s, while public-sector pay is down 2.1 per cent since the Tories came to power in 2010.

TUC general secretary Frances O’Grady said: “The IFS analysis shows that the Conservatives are the party of pay cuts.

“They have imposed real pay cuts on millions of workers year after year. 

“Their famous ‘long-term economic plan’ led to pay falling across the economy. 

“And this year, working people will suffer an average real pay cut of more than £500.”

Labour’s shadow chancellor Rachel Reeves said Mr Sunak had failed to understand the scale of the cost-of-living crisis.

She said: “The Chancellor can say as many times as he likes that he’s a tax-cutting chancellor, but it’s a bit like a kid in his bedroom playing air guitar — he’s not a rock star.”

Mr Sunak insisted the measures he announced would protect the most vulnerable.

“It’s absolutely right we support people on the lowest incomes. I’m confident that the policies we put in place are doing that,” he said.

OWNED BY OUR READERS

We're a reader-owned co-operative, which means you can become part of the paper too by buying shares in the People’s Press Printing Society.

 

 

Become a supporter

Fighting fund

You've Raised:£ 13,288
We need:£ 4,712
3 Days remaining
Donate today