a 10-year high and economists project further increases in 2022. This, along with several government measures like the freezing of the personal income tax allowance and the new social care levy on national insurance, will make 2022 the “year of the squeeze”, the Resolution Foundation said. According to the London-based organisation, UK households will face a hit of £1,200, as a result of the introduction of tax changes in April, along with a new price cap on energy bills.
“The months ahead will not be easy for households who see their wages fall back as energy bills and taxes rise,” the Resolution Foundation said in the report. “As Omicron hopefully fades in the early months of 2022, we will come to realise the scale of the challenge posed to household finances.”
While consumers in the European nation have been shielded to a certain extent by an energy price cap set by the Office of Gas and Electricity Markets (Ofgem), the cap is set to be reviewed in February and come into effect in April. Record rises in wholesale gas prices over the recent weeks suggest that household bills on energy could rise above £2,000. Although Britain’s Business Secretary Kwasi Kwarteng recently held discussions with energy bosses over the matter, the crunch talks failed to deliver a breakthrough.
The Resolution Foundation says that low-income households will be facing the biggest impact of an increase in the price cap in April, since they will be spending a significant portion of their income on energy. According to the think-tank, poorest households could be spending as much as 12 per cent of their earnings on gas and electricity, a significant increase from the current rate of 8.5 per cent.
Meanwhile, the government’s decision to freeze personal tax allowances at £12,570 a year will hit the hardest on higher-income households. The decision was announced by chancellor Rishi Sunak in his budget speech in March, together with an increase of 1.25 percentage points in national insurance to fund social care.
