Inflation ‘will push squeezed families to raid their savings’

SOARING prices will push households to live £1,200 a year beyond their means, forcing millions to raid savings.

Average monthly outgoings will exceed incomes by £100 a month in just two years’ time, according to a report from Yorkshire Building Society and the Centre for Economics and Business Research.

They forecast weekly household spending will rise to £705 by 2024, while pay packages are predicted to fall in real terms. Average weekly incomes will rise just £680, failing to keep pace with inflation which is expected to hit 10pc this year.

It came as Age UK, Britain’s largest charity for the elderly, warned the Government against “sitting on its hands” amid calls for further financial support to help ease the cost-of-living crisis.

Households are already struggling with higher outgoings, which currently stand at £595 a week – just £1 below average weekly earnings. These comprise bills for transport, recreation, food and housing.

Four in 10 people have been forced to dip into their savings to cover higher than normal expenses this year, the report found.

It added that outgoings will be pushed even higher by rising petrol and transport costs, as well as larger utility bills. It now costs almost £90 to fill up a 55-litre tank, with the price of petrol at 163.5p a litre, while energy leaders have warned annual gas and electric bills could hit £3,000 before winter.

Meanwhile, supply chain issues which began in the pandemic, and have been worsened by the war in Ukraine, have pushed up prices in supermarkets, while rising interest rates are adding to mortgage bills.

Age UK warned that 2m older households will be unable to meet higher costs this year, with “no wiggle room” for already stretched incomes.

Caroline Abrahams, a director at the charity, said more support was needed.

She added: “I’m astonished that the bad news about prices keeps rolling in but the Government continues to sit on its hands, and from what we hear many older people are surprised and disappointed too. There must be more that ministers can do to help.”

A government spokesman said it recognised the pressures families faced and that it had provided billions in support, including a £150 council tax rebate to help with energy bills, as well as a £200 energy bills credit to come in October.

He added that the Government has also introduced higher National Insurance thresholds and frozen fuel duty.