Average family £2,100 worse off, with biggest fall yet to come, says Resolution Foundation
The biggest impact of falling living standards is yet to hit, according to new research from Resolution Foundation.
The two-year squeeze is expected to leave families £2,100 worse off, with only the wealthiest households seeing an increase in income.
The Think Tank’s report, entitled “Living Standards Outlook 2023,” reveals that disposable incomes for working-age families are expected to fall by 3% this financial year and by 4% next year.
According to the report, the financial year ahead (2023-24) should see a rapid fall in inflation, although this trend will be offset by a range of living standards headwinds, such as higher energy bills and personal taxes, as well as rising mortgage costs for three million households.
As a result, typical after-housing-costs incomes for working-age families are set to fall by 3% in 2022-23 and by 4% in 2023-24 – a 7% fall over two years’ worth £2,100 for a typical family.
The report also found that the crisis is having a particularly severe impact on lower-income families, with 23% of adults (12 million people) unable to afford to replace or repair major household appliances, and 11% (six million people) going hungry due to a lack of money in the past month.
Despite this, the report notes that government support has prioritized those most in need, except for the very wealthiest households, with the richest 5% set to see an increase in typical incomes due to rising interest rates and a surge in savings and investment income.
Lalitha Try, Researcher at the Resolution Foundation, said:
“Britain is only at the mid-point of a two-year income squeeze, which is set to leave typical families £2,100 worse off. The crisis is already taking its toll on families, with over six million adults reporting they are going hungry as a result.
“Low-income families have been hit hardest by soaring energy bills and food prices, and are most likely to have seen both their financial circumstances and their health deteriorate. The Government has rightly prioritised them in its crisis response – with support targeted at vulnerable households and tax rises hitting better-off families.
Dr Jennifer Dixon, Chief Executive of the Health Foundation, said:
“The cost of living crisis is disastrous for family finances, particularly for those on low incomes and families with more than two children. The crisis is causing immediate damage to the nation’s health with higher food insecurity, people under strain as they fall behind with bills and increased prevalence of emotional distress.
“Action to tackle the cost of living must recognise both immediate and longer-term health risks created by growing financial insecurity and debt. The Government must act now and craft an intelligent strategy targeting those at greatest risk to avoid hampering the nation’s prosperity in years to come.”
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