April could have 'catastrophic' impact on cost of living for swathe of UK population

·Political Correspondent - Yahoo News UK
·3-min read
Stressed black woman working at home alone
Stressed black woman working at home alone

April 2022 could have a "catastrophic" impact on the cost of living for millions of Brits, a think tank has warned.

The Resolution Foundation said next year will be the "year of the squeeze", as people's pockets are hit by rising inflation and tax rises - with the impacts most acutely felt in April. 

Despite a 6.6% rise in the National Living Wage, which the think tank say is "set to (just) protect the lowest earners from a fall in real earnings", they say broader changes "could amount to a cost of living catastrophe".

Read more: Rishi Sunak must cut taxes to counter cost of living crisis, says Mel Stride

Soaring energy prices, rising inflation, and tax rises were identified as key factors driving the crisis - with experts warning households with the lowest incomes will see 12% of their total household budget spent on energy, up from 8.5%.

"Rising inflation has focused minds on the cost of living squeeze this winter," says the think tank. 

RF
Source: The Resolution Foundation

"These pressures are likely to build in the new year with further price rises outstripping pay growth. 

"The spring looks particularly difficult, with April bringing a cost of living catastrophe affecting the vast majority of households: soaring energy bills and significant tax rises will see an annual income hit to the typical household of over £1,000."

The think tank say rises in the form of national insurance hikes, the usual council tax hikes, the VAT rate for hospitality and accommodation to return, and dividend tax rates will pose serious issues for low earners. 

Some estimates suggest that fuel costs could increase by up to 50% in 2022, with Energy UK warning that the spring in particular is set to be difficult and called on more interventions from the government. 

Read more: Outrage as families 'left out in the cold' by Rishi Sunak's £1bn COVID bailout

The review comes following criticism of the government over their economic response to the highly contagious new COVID-19 variant, Omicron - which is already hitting businesses and workers hard across the country amid falling profits and staff absences. 

Torsten Bell, the chief executive of the Resolution Foundation, said in December recent government funding in response to Omicron - such as £6,000 packages for businesses and covering of statutory sick pay for small to medium size businesses - failed workers. 

"Targeted grant approach worked before because it helped cover non-labour costs of firms, while furlough covered labour costs AND protected workers incomes," he said on Twitter.

RF
Source: The Resolution Foundation

"Now there's nothing to help workers where hours are cut or jobs lost, or to incentive firms not to do those things."

He added: "Thoughts with many workers on zero or short hour contracts who rely on the fact that they normally work far more hours. They're getting completely stuffed this Christmas."

Labour have said the growing cost of living crisis has been "made in Downing Street". 

“Eleven years of the Tories has seen family finances hammered and now it’s shaping up to be a miserable January with heating bills rocketing, prices going up and punishing tax rises on the way," said shadow work and pensions secretary, Jonathan Ashworth, on Friday. 

Read more: Rent rise puts pressure on almost 5 million UK families

"This is a crisis made in Downing Street.

“The simple truth is people are skint with little if any savings to fall back on. Ordinary working families shouldn’t be forced to pay the price for Boris Johnson’s economic failure.

“Unlike the Conservatives, Labour wouldn’t be hitting working people with a tax hike, and as heating bills rise, we'd help ease the burden on households by cutting VAT on domestic energy bills now for the winter months."

Read more: Inflation soars to highest for over 10 years as supply chain issues bite

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting