By Report warns UK’s poorest households could see steep inflation rise by autumn
A new report has found that the UK’s poorest households will be hardest hit by the rise of living costs, and they could see an inflation spike of more than 10 percent.
The report from the Resolution Foundation shows inflation will hit lower-income households much harder than richer households.
The foundation has called on Chancellor Rishi Sunak to focus support in his upcoming Spring Statement on low and middle-income families hardest hit by the cost of living crisis.
The report examines the UK’s economic outlook ahead of the Spring Statement on Wednesday 23 March.
The outlook for the family finances is bleak, with the report warning that the conflict in Ukraine meant there was heightened uncertainty around the UK’s economic outlook.
The war will cause higher inflation, which is now likely to peak at over 8 per cent.
The typical family could potentially see their disposable income fall 4 per cent over the coming tax year, which equates to losing £1,000.
The foundation added that this is scale of fall has only previously been seen around recessions.
With the poorest households spending twice the share of their family budgets on food and energy bills, the second inflation spike of 2022 could reach more than 10 per cent for these families.
The report states: “The defining economic feature of 2022 will be a major living standards hit for
households, driven by high and rising inflation. The exact path that prices and earnings growth will take is highly uncertain, but it is clear that the war in Ukraine and the further increase in prices that it is already driving will deepen the major living standards squeeze households face.
“Looking further ahead, it is weak productivity growth rather than high inflation that poses a lasting threat to household living standards.
“Productivity and pay growth will have to perform considerably better than all forecasts currently expect if the years ahead are to deliver meaningful growth in living standards. ”
According to the report, real incomes are projected to fall in 2023-24 by 2 per cent, adding the period from 2019-20 to 2024-25 is currently on track to be the worst parliament on record for income growth.
As benefit boosts are withdrawn, absolute child poverty is also projected to increase in the coming years before the impact of the Ukraine war is even factored in.
The report added: “Looking at relative poverty, absolute poverty, and overall inequality, the most pronounced projected changes are large falls in 2020-21 followed by large rebounds in 2021-22 as benefit boosts were withdrawn.
“The prevalence of absolute child poverty is projected to be higher in 2026-27 than in 2019-20, with a large rise between 2020-21 and 2022-23 even before we consider the impact of the war in Ukraine.”
