MILLIONS of Brits are facing a £1,000 drop in income as the cost of living crunch bites, experts have warned.
Households are facing rising bills and a higher cost of living which will squeeze incomes over the next year.
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It could be the sharpest fall in real incomes – which takes into account rising costs – since the 1970s, according to the Resolution Foundation.
Real household incomes across Britain could fall by 4% for working age people in the financial year 2022 to 2023, the think tank said.
That’s the equivalent of a £1,000 per household fall for non-pensioners, according to research – a scale of decline which would normally be associated with recessions.
The Government’s bill help of £350 through energy rebates for millions of households will help cushion some of the blow.
Millions of households in England will get a £150 council tax rebate this April.
A further £200 will be handed to billpayers to help wither energy costs in October, but will repaid over subsequent years.
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But the help comes as energy bills are set to rise by hundreds of pounds.
The price cap is increasing in April which will add £693 to the average dual fuel tariff for typical households.
Millions of Brits will also start paying more tax in April when National Insurance rates and council tax bills rise.
However, the living wage and some benefits will go up in April too, and could slightly soften the impact of other increases.
The living wage, which is paid to those age 23 and over, will increase from £8.91 to £9.50 an hour from April.
Many benefits like Universal Credit and State Pension will go up by 3.1%.
Inflation to hit incomes
Inflation hit 5.5% this year and is predicted to hit around 8% this spring leaving households worse off in real terms.
Over the course of the year, this will mean a real-terms cut in the value of benefits of more than £10 billion, the Foundation said.
That’s more than the amount the Government spent on pandemic-related temporary benefit increases in 2020-21.
However, if inflation remains high, it could drive a bigger increase in benefits next year.
The amount benefits are uprated each year is based on September’s rate of inflation.
The Resolution Foundation said that while benefit levels should end the “rollercoaster roughly where they began it in real terms”, this approach risks worsening the income shock to families this year.
It has called for Chancellor Rishi Sunak to address the issue in his upcoming spring statement and increase benefits by 8.1% this year.
The increase could then be smaller next year, it said, avoiding an income shock this year.
Bleak outlook for living standards
The outlook for living standards this coming financial year was “bleak” even before the Ukraine crisis, with soaring energy bills disproportionately affecting families on low and middle incomes.
The report said: “The crisis in Ukraine has increased both the scale of price rises but also the degree of uncertainty about their levels and duration.
“So far, the conflict has substantially increased the price of oil and natural gas.”
The report warned: “The UK’s post-Covid economic recovery is well under way, but a deep living standards downturn is just getting going.”
Inflation could peak at 8.3% this spring, the Foundation said.
Incomes are also expected to take a hit in further years, with economic growth in 2023-24 also expected to be weak.
Without a considerable improvement in the outlook for productivity and wages, the typical household income in 2025-26 could be lower than it was in 2021-22, it added.
Poverty levels and weak pay growth are issues that also need to be addressed, the Foundation said.
It warned that the proportion of children living in absolute poverty could be higher in 2026 and 2027 than it was at the start of the decade.
Adam Corlett, principal economist at the Resolution Foundation, said: “Britain has stepped out of a global pandemic and straight into a cost of living crisis.
“Inflation may even exceed the peak seen during the early 1990s, and household incomes are set for falls not seen outside of recessions.”
A Government spokesperson said: “We recognise the pressures people are facing with the cost of living, which is why we’re providing support worth around £20 billion this financial year and next to help.
“This includes putting an average of £1,000 more per year into the pockets of working families via changes to Universal Credit, freezing fuel duties to keep costs down and helping households with their energy bills through our £9.1 billion Energy Bills Rebate.
“We have also boosted the minimum wage by more than £1,000 a year for full-time workers and our £500 million Household Support Fund is helping the most vulnerable with essential costs.”
Four things to do now to beat the cost of living squeeze
Although prices and bills are rising, there are still some things you can do to lessen the impact.
1. Check your benefit entitlement
Struggling Brits could be missing out on thousands of pounds a year by not claiming the benefits they’re entitled to.
Charity Turn2us has estimated that at least 7 million people are missing out on benefits they could be claiming, totalling a massive £15billion.
Council tax is the most underclaimed benefit, with almost 2.8million people not claiming what they should.
You can apply by entering your postcode into the government website, and asking your local council what support is available.
There are plenty of other benefits you might be eligible for too, such as Working Tax Credit or Income Support.
You can check by using an online benefits calculator, which are offered by charities such as Turn2Us and EntitledTo.
2. Get energy bill help
While a good first step to lower your bills is to turn the thermostat down slightly and wrap up warm, no one should face the choice between heating or eating this winter.
Cold weather payments help cover the cost of heating homes when the temperature drops to zero or below for seven days in a row.
You can check if your area has had a cold weather payment by putting your postcode into the government’s tool.
The winter fuel discount can get you up to £300 off your bills depending on your age, whether you receive benefits, and if you live alone.
Most people who are eligible get it automatically, but you can apply if not.
Many suppliers run their own schemes offering help, or have charitable trusts to help pay arrears.
British Gas Energy Trust, for example, runs a scheme where anyone can apply for a grant, and you don’t even have to be a customer.
Other firms that offer grants just to their customers include:
You could be eligible for a budgeting loan if you’ve been on certain benefits for six months.
But while this can help cover some costs like if your boiler breaks down and you need to replace it, or you need to buy new energy appliances, like a washing machine or tumble dryer, you will need to pay the money back.
So check the other non-repayable help you could get first.
3. Apply for welfare grants
Struggling families can apply for cash and grants for furniture, bills and food up to £1,000 under the welfare assistance scheme.
Grants are available through your local council – which will decide whether you’re eligible and what help is available. Some councils don’t have a scheme though.
A £500 million Household Support Fund can also help with household essentials – but you need to apply quickly as it closes soon.
Families could get up to £1,500 to help with food and bills through this, but it’s determined on a case by case basis by your local council.
There are around 8,000 charities and organisations in the UK that offer cash to help struggling families.
Turn2Us has a free grants search tool so you can find out what help is available to you.
4. Haggle your bills down
If you are not happy with the price you are paying, you can always ask for a discount.
Many Virgin Media and Sky customers report they have had success haggling money off their bills.
You can try the same with any broadband, TV or phone provider, including mobile networks, and even with insurance – after all, the worst they can say is no.
If you are planning to haggle, do your research first – use comparison sites to find out the cheapest deals and what your current provider is offering new customers.
If you’re not happy with what you’re paying and are not offered a discount you can always move to another provider.
If you’re worried about paying bills, falling behind or are in debt, there are plenty of organisations where you can seek advice for free, including:
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