Resolution Foundation, a think tank in the United Kingdom, has said that the incomes of families across the country are likely to fall at a time when already they are burdened with high energy costs. This setback in the aftermath of the Russia-Ukraine war will be the worst since 1975 and households’ income may reduce to the tune of £1,000 for the year.
The think tank urged Chancellor Rishi Sunak to take decisive action to subsidize low-income households who are struggling with their day-to-day expenses and prevent a rise in children growing up in poverty.
In a report titled The Living Standards Outlook 2022, the think tank said, the gains made by the increased benefit packages introduced in 2020-21 in terms of reduction of poverty, and inequality will also be wiped out. They projected that absolute poverty, which fell to 16% in 2020-21 from 18% in 2019-20, will again decline to 18% in 2022-23.
The Resolution Foundation has said the drastic hike in oil and gas prices across the globe would mean that inflation in the country to rise above 8% in spring and a fall in incomes by 4% in the next fiscal. “Our preliminary estimate is that the conflict in Ukraine could push peak inflation in 2022-23 to above 8%. This could leave the typical real household income for non-pensioners 4%– or £1,000 – lower than in 2021-22. This is a scale of fall only previously seen around recessions,” they said in its report.
This comes at a time when the UK was already experiencing high levels of inflation at 5.5%, the worst since the last three decades before Russia’s invasion.
This inflation will be triggered by a global fuel price rise even though the UK is not dependent on Moscow for its gas requirements with only 5% of its total supply coming from Russia.
The report added, “We now assume that prices in 2022-23 will on average be 7.6% higher than in 2021-22, up from the Bank of England’s forecast of 6.2% in February. This ignores any possible impact on food prices which, if it did occur, would be particularly skewed towards low-income households.”
The study said that real incomes are projected to also fall in 2023-24, by 2%, driven by weak pay forecasts and the end of the government’s energy bills support package.