Adding to the pressure on Boris Johnson’s successor as prime minister to tackle a worsening cost of living crisis, the Resolution Foundation thinktank said rising energy bills would cut household incomes by 10% and push an extra 3 million people into poverty. The thinktank said the outlook for living standards was “shocking” and “frightening”, noting that without enhanced government support, the fall in the income of the typical household would be twice that of the global financial crisis of the late 2000s and worse than the 8% drop that followed the oil price shock of the mid-1970s. low energy incomes Lalitha Try, researcher at the Resolution Foundation, said: “No responsible government could accept such a prospect, so radical political action is needed to address it. We will need an energy support package worth tens of billions of pounds, combined with rising benefits next year from October inflation.” It came as a separate report warned that a “major humanitarian crisis with the development of millions of children affected” is on the way without urgent government support to alleviate fuel poverty. The report, led by Professor Michael Marmot, director of the UCL Institute of Health Equity (IHE), warned that high fuel costs and rising poverty were damaging health and that growing up in cold homes would have “dangerous consequences” for many children now and into adulthood. Cold homes negatively affect children’s development and cause and worsen respiratory and mental health problems. With prices rising faster than wages, the Resolution Foundation said that average incomes adjusted for inflation would continue to fall until at least the middle of next year – bringing real earnings back to 2003 levels. Living standards were set to fall by 5 % in the current financial year 2022-23 and by a further 6% in 2023-24 – a two-year drop unprecedented even during the hardships suffered during the second world war. The two-decade wage slump was a consequence not only of today’s high level of inflation, but also of 15 years of economic stagnation driven mainly by historically weak productivity, the thinktank added. Liz Truss, the front-runner to replace Johnson, has made tax cuts central to her position as prime minister, but has not ruled out direct financial support to help people struggling with their energy bills. A package is expected before the price cap rises to over £3,500 a year on October 1. Inflation, as measured by the consumer price index, is currently at a 40-year high of 10.1%, but the Bank of England expects it to rise above 13% in October. The cost of living outlook has worsened since Threadneedle Street released its forecast last month and US investment bank Citi said inflation could hit 18% by the middle of next year. income projections disposable income The poorest households faced a higher-than-average rate of inflation because more of their income was spent on the two items that are largely responsible for cost-of-living pressures – food and energy. The thinktank said that by October the least affluent 10% of households would face inflation of 15%. It added that in the absence of policy change or better economic performance, absolute poverty – where income is not sufficient to maintain a basic standard of living – will rise from 17% to 22% of the population by 2024. The jump from 11 million to 14 million will it was the steepest rise on record. “Furthermore, absolute child poverty is expected to jump from 23% in 2021-22 to 31% in 2023-24, an increase of 1 million children,” the thinktank said in a report, In at the Deep End, detailing the cost of living challenge faced by the new prime minister. Real incomes were expected to start rising again when inflation eased in 2023, but would reverse only part of the decline suffered this year and next, the report said. Average household income would be 7% lower in 2024 than in 2019 – easily the worst performance on record for any parliament. Try said: “Britain is already experiencing the biggest fall in real pay since 1977 and a harsh winter is looming as energy bills hit £500 a month. With high inflation likely to remain with us for much of next year, the outlook for living standards is frankly dire. “Typical households are set to see their real incomes fall by £3,000 over the next two years – the biggest squeeze in at least a century – while an extra 3 million people could fall into absolute poverty.” Johnson, who leaves Downing Street next week, has warned voters that the coming months will be “tough”, but the Resolution Foundation has warned that the cost of living crisis will stretch into 2024, making it vital that the UK to face the twin long-term challenges of low growth and high inequality.
title: “Spending Power Of Uk Households To Fall By 3 000 Warns Thinktank Uk Cost Of Living Crisis Klmat” ShowToc: true date: “2022-11-18” author: “Ruben Guidry”
Adding to the pressure on Boris Johnson’s successor as prime minister to tackle a worsening cost of living crisis, the Resolution Foundation thinktank said rising energy bills would cut household incomes by 10% and push an extra 3 million people into poverty. The thinktank said the outlook for living standards was “shocking” and “frightening”, noting that without enhanced government support, the fall in the income of the typical household would be twice that of the global financial crisis of the late 2000s and worse than the 8% drop that followed the oil price shock of the mid-1970s. low energy incomes Lalitha Try, researcher at the Resolution Foundation, said: “No responsible government could accept such a prospect, so radical political action is needed to address it. We will need an energy support package worth tens of billions of pounds, combined with rising benefits next year from October inflation.” It came as a separate report warned that a “major humanitarian crisis with the development of millions of children affected” is on the way without urgent government support to alleviate fuel poverty. The report, led by Professor Michael Marmot, director of the UCL Institute of Health Equity (IHE), warned that high fuel costs and rising poverty were damaging health and that growing up in cold homes would have “dangerous consequences” for many children now and into adulthood. Cold homes negatively affect children’s development and cause and worsen respiratory and mental health problems. With prices rising faster than wages, the Resolution Foundation said that average incomes adjusted for inflation would continue to fall until at least the middle of next year – bringing real earnings back to 2003 levels. Living standards were set to fall by 5 % in the current financial year 2022-23 and by a further 6% in 2023-24 – a two-year drop unprecedented even during the hardships suffered during the second world war. The two-decade wage slump was a consequence not only of today’s high level of inflation, but also of 15 years of economic stagnation driven mainly by historically weak productivity, the thinktank added. Liz Truss, the front-runner to replace Johnson, has made tax cuts central to her position as prime minister, but has not ruled out direct financial support to help people struggling with their energy bills. A package is expected before the price cap rises to over £3,500 a year on October 1. Inflation, as measured by the consumer price index, is currently at a 40-year high of 10.1%, but the Bank of England expects it to rise above 13% in October. The cost of living outlook has worsened since Threadneedle Street released its forecast last month and US investment bank Citi said inflation could hit 18% by the middle of next year. income projections disposable income The poorest households faced a higher-than-average rate of inflation because more of their income was spent on the two items that are largely responsible for cost-of-living pressures – food and energy. The thinktank said that by October the least affluent 10% of households would face inflation of 15%. It added that in the absence of policy change or better economic performance, absolute poverty – where income is not sufficient to maintain a basic standard of living – will rise from 17% to 22% of the population by 2024. The jump from 11 million to 14 million will it was the steepest rise on record. “Furthermore, absolute child poverty is expected to jump from 23% in 2021-22 to 31% in 2023-24, an increase of 1 million children,” the thinktank said in a report, In at the Deep End, detailing the cost of living challenge faced by the new prime minister. Real incomes were expected to start rising again when inflation eased in 2023, but would reverse only part of the decline suffered this year and next, the report said. Average household income would be 7% lower in 2024 than in 2019 – easily the worst performance on record for any parliament. Try said: “Britain is already experiencing the biggest fall in real pay since 1977 and a harsh winter is looming as energy bills hit £500 a month. With high inflation likely to remain with us for much of next year, the outlook for living standards is frankly dire. “Typical households are set to see their real incomes fall by £3,000 over the next two years – the biggest squeeze in at least a century – while an extra 3 million people could fall into absolute poverty.” Johnson, who leaves Downing Street next week, has warned voters that the coming months will be “tough”, but the Resolution Foundation has warned that the cost of living crisis will stretch into 2024, making it vital that the UK to face the twin long-term challenges of low growth and high inequality.
