The UK’s most vulnerable families and pensioners face an 18-month-long squeeze on incomes as benefits fail to keep pace with a surge in the cost of living, economists have warned.
The speed of price growth is set to peak at close to 5 per cent in spring next year and remain high for the next two years according to the Bank of England and government spending watchdog, the Office for Budget Responsibility.
It means people on benefits will have to wait for the lagging state pension and universal credit to catch up with surging inflation.
Baroness Altmann, the Conservative peer and former pensions minister, said the pressure would be felt disproportionately by the less well-off.
“I do worry that the lives of older people who don’t have huge wealth don’t seem to matter,” she told The Independent. “Policies have been introduced that seem to favour those older people who are already well-off and have taken money away from those who can least afford it.” She added that pensioners were especially exposed to inflation, as poorer retired people spend a greater share of their income on “basic essentials” which have shot up in price.
Mike Brewer, chief economist and deputy chief executive of the Resolution Foundation, said, “We’re also in a for a year or several months of stagnating real wages too.”
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