The £3,000 big squeeze: Household bills are set to soar by almost double last month’s forecast as experts warn of ‘Awful April’ for families
- Households facing £3,000 spending squeeze in 2022 due to rising inflation
- Economists say inflation could hit a 30-year high – now dubbed ‘Awful April’
- Chancellor Rishi Sunak is under increasing pressure to ease the swelling crisis
- Nearly one in three households could soon struggle to afford to heat own homes
Economists expect inflation to hit a 30-year high in what has been dubbed ‘Awful April’, forcing the Centre for Economics and Business Research (CEBR) to re-evaluate its already gloomy forecast less than a month after making it.
Chancellor Rishi Sunak is under increasing pressure from many in his own party to step up and ease the swelling crisis.
Experts predict basic household spending will be £2,440 higher than at the start of the pandemic. But on top of this, families are facing the added burden of a £600 national insurance hike and other tax rises.
Chancellor Rishi Sunak is under increasing pressure from many in his own party to step up and ease the swelling crisis
Households are facing at least a £3,000 spending squeeze in 2022 as soaring energy bills send inflation through the roof
It comes as the Resolution Foundation think-tank today warns that nearly one in three households could soon struggle to afford to heat their homes.
The CEBR last month said the average household of two adults and two children could expect to pay £1,700 more in 2022.
But it has now revised the sums – estimating that inflation will hit at least 6.4 per cent in April, meaning that household spending rises by £47 a week or £203 a month.
‘We’ll have to earn hundreds more a month’
Imogen and Duncan Tinkler have already seen their energy bills rise by £100 a month.
And now they are expecting a raft of other bills to increase – putting pressure on them to earn more.
The couple, who have a four-year-old daughter, Xanthe, and newborn Athene, run a small food business. They employ two staff meaning they will have to pay higher national insurance contributions on their wages from April.
Mrs Tinkler, 39, from Whitstable, Kent, said: ‘We have yet to sit down and work it all out but it looks like we’ll need to earn an extra £500 a month to make up for our increased costs.’
The forecast includes utility bills, transport costs, as well as spending on food and drink, clothing, and recreation. Last month figures showed inflation was 5.1 per cent.
Laura Suter, head of personal finance at investment firm A J Bell, said: ‘The cost of living squeeze is becoming more like a crush as rising costs on top of tax hikes will leave many families struggling to pay for the essentials every month.
‘It’s not just the poorest families that will be affected – everyone is feeling the effect of price rises.
‘Once “Awful April” hits and people are faced with the new National Insurance hike, as well as other tax increases and council tax rises, the situation is going to look even more grim.’
So far the Chancellor has brushed off calls to scrap the new health and social care levy which will cost a worker 1.25 per cent of their wages from April.
April also marks the start of the income tax threshold freeze which will see an estimated 1.2 million people dragged into the 40 per cent rate bracket over five years. Council tax is expected to rise by up to 3 per cent that month too.
Households are also living under the threat of a rise in interest rates.
The Bank of England last month lifted the base rate to 0.25 per cent after it had been at a record low since March 2020. But experts predict it could be hiked to 1 per cent to tackle rising inflation.
This would mean a household with a £200,000 mortgage would be need to shell out an extra £1,200 a year compared to at the start of the pandemic.
Jake Berry, Tory MP and chairman of the backbench Northern Research Group, said the Chancellor needed to do more to help families.
‘The cost of living crisis will have a real impact on families across the country and the Government needs to urgently start exploring ways of reducing its impact,’ he added.
‘They should look at freezing council taxes, removing green taxes from energy bills, and ensuring no one pays the national insurance increase until they start to pay income tax. These are the sort of bold measures we need to help families with these increasing costs.’
April also marks the start of the income tax threshold freeze which will see an estimated 1.2 million people dragged into the 40 per cent rate bracket over five years. Council tax is expected to rise by up to 3 per cent that month too. [File picture]
Energy regulator Ofgem is due to announce a new price cap next month that will dictate how high energy firms can hike bills in April to cover the soaring cost of wholesale gas. Experts fear it could mean the average bill soars by at least 50 per cent to nearly £2,000 a year.
A report from the Resolution Foundation today predicts that as many as 27 per cent of households could this year find their energy bills unaffordable – up from the current 9 per cent. It would mean around 6.3 million households being forced to spend at least 10 per cent of their income on energy.
Age UK director Caroline Abrahams said: ‘Make no mistake, this situation will have a devastating impact on the health of our older population unless the Government intervenes quickly and takes their fears away.’
Shadow Chancellor Rachel Reeves said: ‘With rising energy bills, soaring food costs and fuel hitting a record high, working families are really feeling the crunch. Something needs to be done.’
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