For millions of UK households, the cost of living crisis has been a constant companion for years – a nagging sense of financial insecurity that refuses to ease. The Resolution Foundation's stark warning to the incoming Prime Minister is a timely reminder that this isn't just an economic issue, but a human one.
The think tank's analysis reveals that while median household incomes have grown by 2.2 per cent annually over the past Parliament – leaving households £1,000 better off – recent developments threaten to undermine these gains. The Office for Budget Responsibility forecasts minimal wage growth, and a sudden spike in energy prices is projected to reduce typical household living standards by as much as £500 this year.
The briefing highlights two distinct cost of living crises facing the new leader: an immediate one and a chronic, long-term challenge. On the immediate front, there's some relief that the feared full-blown winter energy crisis may be averted – with current wholesale oil and gas prices suggesting energy bills will only rise by around 6 per cent this winter. While still unwelcome news for many families, it might not necessitate emergency support measures.
However, the chronic problem of putting more money in people's pockets persists. The Resolution Foundation points out that inflation has disproportionately affected the poorest families – running 0.7 percentage points higher for them than for the wealthiest – largely due to sharp increases in essential goods. Since 2016, energy prices have surged by 73 per cent and food by 47 per cent, while weekly earnings have only risen by 51 per cent.
To address the ongoing energy cost burden, the think tank proposes a policy intervention: removing the remaining levies from household electricity bills – an initiative estimated to cost £2.6 billion. Crucially, they suggest this could be funded by closing 'death and exit loopholes' in capital gains tax, arguing that such a move would not only cover the cost but also leave additional funds.