Britain is experiencing the highest inflation rates since the early 1980s, with household budgets under severe strain. Energy bills and petrol costs have soared, while food inflation hit a 13-year high of 8.3% in May, according to market research firm Kantar. The government has announced billions in emergency support but faces criticism as millions struggle to afford basic necessities.
Data compiled by the Resolution Foundation and the National Institute of Economic and Social Research (NIESR) reveals the scale of hardship. Years of austerity and low income growth have left low earners with little financial buffer. Forecasts indicate many households will fall into the red, at least temporarily, as incomes fail to keep pace with rising costs.
Adam Corlett, principal economist at the Resolution Foundation, said: 'Inflation hitting its highest level in four decades is the main cause of the cost-of-living squeeze, causing pay packets and families’ household incomes to fall in real terms.' He added that while the crisis should ease next year, the broader context of weak economic growth and stagnating living standards leaves households vulnerable to shocks.
The analysis uses data from the Department for Work and Pensions and the ONS’s Wealth and Assets Survey, incorporating government announcements up to late May 2022. Estimates for 2023-24 are based on assumptions and should be treated cautiously due to global economic uncertainty.
