Rishi Sunak warned Britons’ incomes hit by £1,000 cut – and that’s BEFORE new tax rises
Martin Lewis offers advice on rising energy bills and direct debits
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Households are set to see their real incomes hit by two percent in 2022. The Resolution Foundation said “there will be major headwinds to families’ spending power” in the months ahead.
Inflation has skyrocketed in recent weeks due in part to the surge in gas prices.
The Bank of England now expects inflation to be above four percent by the end of this year and continuing into 2022.
The large rise will cancel out most pay rises given to workers to leave them approximately two percent worse off.
“Higher inflation reduces the amount of goods and services that households are able to afford, eroding the real value of incomes,” the Resolution Foundation said.
“All this looks set to mean that aggregate real household income may fall slightly in the coming months and that the outlook for living standards is – at best – little changed since March despite the stronger economy.”
Britons have already been hit by a 1.25 percent increase in national insurance to pay for health and social care.
At the same time, pensioners have been seen the triple lock on their payouts abandoned for the next year and those on Universal Credit have seen a £20 temporary uplift removed.
Households are also grappling with higher energy prices, with bills set to be as high as £1,660 a year by next spring – a rise of over 45 percent in just 12 months.
Mr Sunak is wrestling with how to bring down record debt built up during the pandemic while funding the Government’s ambitious policy agenda and helping families through the winter.
He will deliver his Budget to the House of Commons next Wednesday.
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Last month the Treasury announced a new £500million winter hardship fund which would be distributed to councils to help families in need over the coming months, however, critics have warned the money is not enough to deal with the cost of living crisis.
It is also thought some in Government are pushing for the Chancellor to slash the five percent VAT on energy bills to help families with costs.
However, last night a source close to Mr Sunak dismissed the claims and said there were no plans to announce measures next week.
James Smith, research director at the Resolution Foundation, said: “The backdrop to the Budget will be a strong recovery from the pandemic that risks being derailed by rising inflation and economic disruption that will squeeze both the chancellor’s borrowing windfall and family budgets.
“The decisions that Rishi Sunak will take next Wednesday will help to define the rest of the Parliament, and the type of Chancellor he’ll be remembered as.
“But amid such long-term and legacy-defining announcements, he must not forget the cost of living crunch facing families up and down the country right now.”
The Treasury said: “We are supporting people with the cost of living, including through a new £500million support fund to help vulnerable households, the energy price cap, and support with energy bills through the winter.
“Our Plan for Jobs is also helping people across the country to find great work and progress in their careers.”
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