Tax hikes and soaring bills will deliver the biggest shock to household incomes for almost half a century.
A person earning £30,000 will see their take-home pay plunge by £1,660 thanks to soaring living costs, stagnant wages and tax increases, according to the Institute for Fiscal Studies (IFS).
The effective pay cut includes paying £250 more in national insurance contributions and £150 more in income tax. Poorer households, which spend more of their incomes on essentials like energy, will be hit even harder, with hundreds of thousands expected to fall into fuel poverty. Someone earning £15,000 a year will take an £860 hit to their real income after tax.
Citizens Advice warned people were being forced to make “desperate decisions” between eating or heating their homes. "...things are set to go from bad to worse..."
George Dibb, head of the IPPR’s Centre for Economic Justice, explained, “The UK is facing a sustained cost of living crisis where incomes could be hit even harder than the financial crash of 2008. If this proves to be the case you have to look back as far as the 1970s to find a worse shock to households’ real disposable income.”
Households were already approaching the current crisis in a financially vulnerable position due to 13 years without a real increase in average earnings, said Frank van Lerven of the New Economics Foundation.
According to the NEF, some 21.4 million people are living below a socially acceptable living standard. The think tank does not expect real wages to recover to their 2008 level until the end of 2028.