A top economist has warned there is a “very real possibility of poverty for many this winter” as the cost of living crisis continues to spiral.
James Smith, director of research at the independent think tank Resolution Foundation, said the Bank of England’s (BoE) latest “poor forecasts” mean the crisis will last longer and hit households harder than previously thought.
Last week, the BoE warned that the nation faces a 15-month recession and inflation of more than 13% later this year.
In an effort to curb high rates, it raised interest rates from 1.25% to 1.75%, the biggest increase in 27 years, a move that will put new pressure on mortgage holders and borrowers.
Smith said the bank’s forecasts “reveal the challenges facing the next prime minister”.
He added: “The reality is that whoever enters Downing Street in September will face an immediate challenge to provide targeted support to avoid the very real possibility of poverty for many this winter.”
Last week, energy consultancy Cornwall Insight warned that energy bills could reach £3,359 a year from October for the average household.
At the start of this year, the average energy bill was £1,277 a year.
Also, Ofgem – the energy industry’s regulator – announced that the price cap will be changed every three months from October, with adjustments previously every six months, meaning bills will rise again in January.
Ofgem said it is changing the rate cap update to quarterly because the market is moving so quickly and it is not sustainable for people to pay a rate up to six months old.
As Britain’s economy continues to face worsening conditions, pressure is mounting on the next prime minister to take further action.
Liz Truss, the front-runner in the Conservative leadership race, has pledged to hold an emergency budget if she becomes prime minister next month, in which she would scrap the national pension increase and the proposed rise in corporation tax.
Rival Rishi Sunak attacked her plans, describing them as a “big bung” for big business and the better-off, which would do little to help those most in need in the coming winter.
Sunak said her plans to scrap the National Insurance increase, which he brought in as chancellor to fund the NHS and social care, would make someone on the National Living Wage less than £60 a year better off, while pensioners would not get a penny.
The former chancellor has said he would get inflation under control before introducing tax cuts.
In an interview with Sunday Times last week Sunak outlined plans for another multi-billion pound package to ease the cost of living crisis.
Meanwhile, former Prime Minister Gordon Brown has demanded that the government come up with an emergency budget this week.
Brown said in The Observer: “A financial time bomb will explode for families in October as a second round of fuel price rises in six months sends shockwaves through every household and pushes millions over the edge.
“A few months ago … York University estimated that April’s 54% increase in fuel prices would trap 27 million people in 10 million households in fuel poverty.
“Now 35 million people in 13 million households – an unprecedented 49.6% of the UK population – are at risk of fuel poverty in October.”
Brown urged Truss, Sunak and Boris Johnson to join forces and address the issue now.