The poorest households in the UK could see their cost of living jump by as much as 10 percent by this autumn if Russia-Ukraine conflict is prolonged, a think tank has warned, as Chancellor Rishi Sunak is set to deliver his spring statement on March 23.
According to the think tank Resolution Foundation, the UK's economic outlook has deteriorated significantly. At the time of the budget, inflation was expected to fall back later in the year. Instead, food and energy prices were likely to continue to be driven higher, pushing inflation to a “second peak” above 8 percent in the autumn, the think tank said.
With the poorest tenth of households spending twice as much of their budget on food and fuel as the richest, they are likely to be hardest hit, experiencing an inflation rate of perhaps 10 percent.
“The chances of a living standards recovery this year are receding as rapidly as inflation is rising, and the risk of another recession is looming into view,” The Guardian quoted James Smith, the research director at the thinktank, as saying.
“The chancellor will therefore need to make some tough, and potentially expensive, choices in how to respond.”
Labour and many Conservative MPs have been urging Sunak to scrap the 1.25 percentage point rise in national insurance contributions, earmarked for health and social care, but government sources insist it will go ahead as planned next month.
The think tank’s warning comes a couple of days after consumer expert Martin Lewis said that some families would “simply starve or freeze” as a result of unmanageable increases in their cost of living, particularly driven by energy prices.
Urging Sunak to take action in his spring statement, Lewis predicted that energy bills for an average household could hit £3,000 in October, giving a stark assessment of the potential effects of such a rapid increase, when many families are already struggling, and inflation is running at a 30-year high.
