Cost of living for UK’s poorest could be 10% higher by autumn, thinktank warns
The poorest households in the UK could see their cost of living jump by as much as 10% by this autumn if Russia’s invasion of Ukraine leads to a prolonged conflict, a thinktank has warned, as Rishi Sunak faces mounting pressure to tackle the cost of living crisis.
The chancellor will deliver his spring statement on 23 March. He is reluctant to commit to significant extra spending, but Treasury sources concede he has acknowledged the necessity to take some limited action.
Options could include increasing benefits in April by more than the planned 3.1%, a new cut in the taper rate for universal credit so that claimants keep more of their earnings, or an increase in the national insurance threshold.
Labour and many Conservative MPs have urged 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 Resolution Foundation said the public finances look healthier than expected at the time of the autumn budget, with borrowing on course to be £30bn lower than forecast.
However, the economic outlook has deteriorated significantly. At the time of the budget, inflation was expected to fall back later in the year. Instead, the Resolution Foundation said food and energy prices were likely to continue to be driven higher, pushing inflation to a “second peak” above 8% in the autumn.
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%.
James Smith, the research director at the thinktank, said: “The chances of a living standards recovery this year are receding as rapidly as
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