A United Kingdom think tank has cautioned that millions of families in the country would face a “year of the squeeze” in 2022.
Higher energy bills, stagnating earnings, and tax increases may cost homeowners £1,200 per year, according to the Resolution Foundation.
In April, the energy price cap and National Insurance contributions both increased, according to the study.
The government claims to have set aside £4.2 billion to help families.
Millions of families will face a “cost-of-living crisis” next year, according to the Resolution Foundation.
According to the report, a 1.25 percent increase in National Insurance contributions will cost the average household £600 per year, while the increased energy bills cap will add £500 to spending. Both will take effect in April.
The failure of several energy companies would result in an additional £100 being charged to gas and electricity bills. Customers of defunct energy businesses have been transferred to new providers, but this means they may be charged a different – and perhaps more costly – tariff than before.
Wholesale gas prices have grown to previously unheard-of heights in recent months. They hit a new high of 450p per therm last week, which experts believe will push typical annual gas bills to almost £2,000 next year.
Business Secretary Kwasi Kwarteng met with CEOs of UK energy businesses and the industry’s regulator, Ofgem, earlier this week “to examine the sector’s ongoing effects of record-high worldwide gas prices.”
To help consumers, Labour has proposed that the government abolish VAT from residential heating bills immediately this winter.
The government could also reduce “some of the environmental social policy expenses that we have seen develop over the years,” according to Stephen Fitzpatrick, CEO of Ovo Energy, who attended the virtual conference on Monday.
Meanwhile, according to figures from the Office for National Statistics, the cost of living in the UK increased by 5.1 percent in the year to November, the largest increase in ten years.
According to the Bank of England, inflation will reach 6% in the spring, and the Resolution Foundation has warned that real wage growth will slow. Inflation was flat in October, “almost certainly started falling last month and is unlikely to start growing again until the final quarter of 2022”, it said.
“The overall picture is likely to be one of prices surging and pay packets stagnating,” said Resolution Foundation chief executive Torsten Bell.
Following the conclusion of the government’s furlough program on 30 September, he said the UK jobs market had shown evidence of robustness during the pandemic, with the unemployment rate close to pre-Covid levels at 4.2 per cent.
He also mentioned that the national living wage will increase by 6.6 percent in April, which he claims will protect “the lowest income from some of the price increases we’re witnessing.”
While some segments of the workforce have enjoyed significant salary increases, such as in-demand HGV drivers, Bell claims that “generally the picture is prices going up for everyone while salaries go up for some.”
Chancellor Rishi Sunak, according to Bell, may face additional pressure to implement his economic plan outlined in the Autumn Budget.
Poorer families will be the hardest hurt by the “year of the squeeze,” according to the foundation’s analysis because they spend a bigger proportion of their income on energy.
(Adapted from BBC.com)