THE next Tory prime minister is on course to preside over the deepest squeeze on living standards in a century, a report has found.
The Resolution Foundation, a think tank which aims to improve the lives of low and middle-income families, predicts three million more people will be plunged into poverty over the next two years.
Real household disposable incomes are on course to fall by 10% over the same time period, the report stated, as it warned the UK faces a bleak winter from surging energy bills and runaway inflation.
It found the cost-of-living crisis will stretch well beyond this winter into next year and 2024.
Real earnings, which are already falling at their fastest rate since 1977, are forecast to continue falling until at least mid-2023, by which time all real pay growth since 2003 will have been wiped out.
This unprecedented two-decade-long wage depression is a consequence not just of record inflation today, but of more than 15 years of economic stagnation driven primarily by historically weak productivity, the think tank said.
The overall impact of these forecasts, which show what will happen without further significant interventions from the UK Government, would see real household disposable incomes fall by 5% this year (2022-23).
This stark 10% income fall over two years – equivalent to £3000 for the typical household – would be the deepest living standards squeeze in a century.
The Resolution Foundation has called for a “substantial policy intervention” on “energy prices or incomes to limit destitution over this winter.” The boss of major energy company Ovo has called on the UK Government to take urgent action to prevent the poorest households going cold and hungry.
Lalitha Try, a researcher at the Resolution Foundation, said: “Britain is already experiencing the biggest fall in real pay since 1977, and a tough winter looms as energy bills hit £500 a month.
“With high inflation likely to stay with us for much of next year, the outlook for living standards is frankly terrifying.
“Typical households are on course to see their real incomes fall by £3000 over the next two years – the biggest squeeze in at least a century – while three million extra people could fall into absolute poverty.
“No responsible government could accept such an outlook, so radical policy action is required to address it. We are going to need an energy support package worth tens of billions of pounds, coupled with increasing benefits next year by October’s inflation rate.
“The new prime minister also needs to improve Britain’s longer-term outlook, which can only be achieved by a new economic strategy that delivers higher productivity and strong growth.”
SNP shadow chancellor Alison Thewliss MP said even after 12 years of austerity the Tories have repeatedly failed to bring in “meaningful” cost-of-living support.
She said: “Under the Westminster Tories, relative child poverty is set to reach its highest level since the 90s.
“And that comes as no surprise, given they spent the past decade systematically dismantling the UK’s social security system and bringing in poverty-inducing policies such as the two-child cap, the benefit cap, the bedroom tax and slashing Universal Credit by over £1000 during a global pandemic.”
The Glasgow Central MP said the Tories have “made clear that they will always prioritise making the rich richer over supporting the most vulnerable in society”, adding that their failure to enact urgent measures to help with energy bills “speaks volumes”.
She continued: “The SNP has repeatedly called for urgent action from the UK Government, including measures such as doubling the energy bills grant, reinstating the Universal Credit uplift and extending it to legacy benefits, reversing the energy price cap increase, bringing in a Real Living Wage and matching the Scottish Child Payment.
"All of these calls have been ignored.
“Scotland has shown it is on a different path, by bringing in a social security system based on dignity and respect, and child-poverty reducing policies such as the Child Payment and Best Start Grants.
"We can only go further with the full powers of independence.”
