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UK Cost of Living Will Spike in 2022

UK Cost of Living Will Spike in 2022
Source: The Japan Times

A research group has warned that millions of families would face a “year of the squeeze” in 2022.

Higher energy costs, stagnating earnings, and tax increases, according to the Resolution Foundation, may cost homeowners £1,200 per year.

In April, the energy price cap and National Insurance contributions both increased, according to the study.

The government claims to have set aside £4.2 billion to help families.

Millions of families will face a “cost-of-living crisis” next year, according to the Resolution Foundation.

According to the report, a 1.25 percent increase in National Insurance payments will cost the average household £600 per year, while the increased energy bills cap will add £500 to spending. Both will take effect in April.

The failure of several energy companies would result in an additional £100 being charged to gas and electricity bills. Customers of defunct energy businesses have been transferred to new providers, but this means they may be charged a different – and perhaps more costly – price than before.

Wholesale gas prices have grown to previously unheard-of heights in recent months. They hit a new high of 450p per therm last week, which experts believe would push typical annual gas costs to almost £2,000 next year.

Business Secretary Kwasi Kwarteng met with CEOs of UK energy businesses and the industry’s regulator, Ofgem, earlier this week “to examine the sector’s continued consequences of record high worldwide gas prices.”

To aid consumers, Labour has proposed that the government abolish VAT from residential heating bills immediately this winter.

The government could also reduce “some of the environmental social policy expenses that we have seen develop over the years,” according to Stephen Fitzpatrick, CEO of Ovo Energy, who attended the virtual conference on Monday.

Meanwhile, according to figures from the Office for National Statistics, the cost of living in the UK increased by 5.1 percent in the year to November, the largest increase in ten years.

According to the Bank of England, inflation will reach 6% in the spring, and the Resolution Foundation has warned that real wage growth, which was flat in October, “very surely started declining last month and is unlikely to start expanding again until the fourth quarter of 2022.”

“The overall image is going to be one of prices increasing and pay packets stagnant,” said Torsten Bell, chief executive of the Resolution Foundation.

Following the end of the government’s furlough plan on 30 September, he informed reporters that the UK labour market had showed evidence of resilience during the epidemic, with the unemployment rate close to pre-Covid levels at 4.2 percent.

He also said that the national living wage will increase by 6.6 percent in April, which he claims will shield “the lowest income from some of the price increases we’re witnessing.”

While some sectors of the workforce have received significant salary increases, such as in-demand HGV drivers, Mr Bell believes that “generally the picture is prices going up for everyone while salaries go up for some.”

Mr Bell believes that Chancellor Rishi Sunak may face more pressure to implement his economic agenda outlined in the Autumn Budget.

Poorer households will be the worst hurt by the “year of the squeeze,” according to the foundation’s analysis, because they spend a bigger proportion of their income on energy.

According to a government spokeswoman, the government’s assistance includes lowering the Universal Credit taper and measures to help with expenditures, such as cold weather payments and a freeze in alcohol and fuel duty.