02 Sep 2022
Real household disposable incomes in the UK are on course to fall by 10% over this year and next, representing the deepest living standards squeeze in a century, according to the Resolution Foundation.
A report published by the think tank notes that Britain faces a bleak winter for living standards, with soaring energy bills behind the Bank of England (BoE) forecasting inflation to peak at 13%.
The outlook has worsened since the BoE's forecast in August, with Citi projecting an inflation peak of 18%, it added.
According to the report, without further significant interventions from the government, real household disposable incomes could fall by 5% this year. Although inflation will ease in the following year, typical incomes are set to fall by a further 6%.
This 10% income fall over two years – equivalent to £3,000 for the typical UK household – would be the deepest living standards squeeze in a century, it added.
Lalitha Try, Researcher at the Resolution Foundation, said: 'Britain is already experiencing the biggest fall in real pay since 1977, and a tough winter looms as energy bills hit £500 a month. With high inflation likely to stay with us for much of next year, the outlook for living standards is frankly terrifying.
'No responsible government could accept such an outlook, so radical policy action is required to address it. We are going to need an energy support package worth tens of billions of pounds, coupled with increasing benefits next year by October's inflation rate.'