UK households £2,900 worse off due to five-year cost crisis

Summarised from 3 outlets · Updated 8 Oct, 00:19 · Archive

British households are nearly £3,000 worse off after five years of exceptionally high inflation driven by the pandemic and conflicts.

British households are nearly £3,000 worse off following five years of exceptionally high inflation, according to research from the Resolution Foundation think tank. A study by the Resolution Foundation found that the average household would be £2,900 better off had inflation remained at standard levels. The UK endured the equivalent of 13 years of typical price rises in just five years, driven by the pandemic and conflicts in Ukraine and the Middle East. Inflation peaked at 11.1% during this period.

Energy has been at the centre of the price shock for households. Higher energy costs have bled into other prices, with food inflation peaking at nearly 20% in March 2023. Around 1.7 million families were unable to keep warm enough in 2022/23 compared to the previous year. The proportion of low-income households falling behind on priority commitments such as rent, water, council tax and energy has almost doubled since 2020, with 18 per cent reporting arrears by March this year.

The pain felt from these price rises has not been shared equally. Inflation was steepest for essentials, which make up a larger share of poorer households' spending. The rise in non-housing costs since before the pandemic has been around one-sixth bigger for the poorest tenth of households than for the richest tenth. James Smith, chief economist at the Resolution Foundation, said: 'While the hit to incomes from rising prices has been felt right across the board, the hardship has not been equally shared. It is poorer families who have cut back hardest on heating and are falling behind fastest on essential bills.'

Smith also said the conflict in the Middle East is set to keep energy prices high. He warned that cost-of-living help was needed 'just when the public finances leave less room than ever to provide it', as Chancellor John Healey prepares his first Budget. The comments come amid pressure on the Chancellor to provide additional support for families following widespread calls for cost-of-living relief.

How it is being reported

• Typical family £2,900 worse off due to cost of living crisis, think tank findsReport: Five years of a near-continuous cost of living pressures have caused the real incomes to fall by almost 8%The Mirror · 8 Oct, 00:05
• Cost of living squeeze over past five years has left working families £2,900 worse off, Resolution Foundation analysis showsWorking families are £2,900 a year worse off thanks to the cost of living squeeze over the past five years, new analysis shows.This is Money · 8 Oct, 00:02
• UK households left thousands of pounds worse off due to cost-of-living crisis, study findsHad inflation been at normal levels over this period, the average household would be £2,900 better off than they currently areThe Independent · 8 Oct, 00:01

In this story: Resolution Foundation · James Smith · John Healey · Ukraine · Middle East · UK

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