Households face a ‘year of the pig’ as further pressures on living standards loom in 2023, the think tank has warned.
While the coming year may offer some relief to economic policymakers, with signs that inflation will ease and interest rates rise lower than previously thought, family finances face a repeat of the 2022 crisis as the cost-of-living crisis deepens, according to the Resolution Foundation. new year perspective. .
The fund described 2022 as dire, with real household disposable income falling by 3.3% over the year, or £800 per household, marking the biggest annual fall in a century.
In October, inflation may have already reached 11.1 percent, and wholesale energy prices have significantly decreased, the fund notes.
It said companies are also reporting that recruiting difficulties are easing.
But it added that households will face a further squeeze on their living standards in 2023, with incomes forecast to fall by 3.8%.
This comes despite benefits and the National Pension set for welcome rises of 10.1% and 9.7% respectively in April, it said.
Wages will continue to decline in real terms through the second half of 2023 and are unlikely to even return to their current levels until the second half of 2024, according to a research center focused on improving people’s living standards. low to middle incomes.
Household spending on energy bills is expected to hit a record high as retail prices rise further and government support is cut. A typical household energy bill is set to rise to £2,450 from £1,550 in 2022 and £1,170 in 2019, the Foundation said.
While support for energy bills is being cut, the report says tax rises will increase, with middle-income households seeing their personal taxes rise by around £1,000 from next April.
Rapidly rising interest rates in 2022 will also lead to higher mortgage costs in 2023 as around two million households switch to new fixed rate deals.
The results of a new YouGov survey of 10,470 adults, commissioned by the Resolution Foundation, show that people are more than four times more likely to think their financial situation has gotten worse than better in the past year.
One in eight (12%) said their financial situation was better, while more than half (57%) said it was worse.
Thorsten Bell, executive director of the Resolution Foundation, said: “From a cost-of-living perspective, 2022 was a truly terrible year, far worse than any year during a pandemic or financial crisis.
“2023 should see the fallout of double-digit inflation, but it looks set to be a cold year for many families, with incomes set to fall by as much as in 2022.
“Many families will be helped by benefits and a rise in the National Living Wage, both by around 10% next April.
“But that will be swamped by cuts to pay packets, a record £900 energy rise, a £1,000 rise in tax for the average household and millions of people seeing their mortgage payments rise into four figures.
“For family living standards, things will get a lot worse in 2023 before they start to get better.”
The spokesperson of the Treasury said. “We’re committed to supporting families with children, which is why this year we’ve increased both Child Benefit and Child Tax Credit in line with inflation, and made changes to Universal Credit so working families can keep more of what they earn. .
“We also have a plan to help more than halve inflation next year, easing the financial pressures facing households, and we’ve already taken millions of people out of paying tax altogether by increasing the two income tax credits. and national insurance more than inflation since 2010.
“This is on top of significant cost-of-living support as everyone benefits from the energy cost freeze this winter, and more than eight million vulnerable households have already received £1,200 in cash payments direct to their bank accounts, with a further £900 next year for the recipients of benefits in the amount of funds”.
