New Year cost of living rise warning

Millions of families are facing a "cost-of-living catastrophe" due to soaring energy bills and rising taxes, leading economic experts warn.

The Resolution Foundation said that from next April families would typically face a £1,200-a-year hit to their incomes as the energy price cap is raised and a 1.25% increase in National Insurance contributions comes into effect.

At the same time rising inflation - forecast to peak in the spring at 0.6% - means that real pay levels are set to stagnate, with real wages next Christmas no higher than they are this year.

The Foundation's chief executive, Torsten Bell, said the squeeze on living standards is likely to put Chancellor Rishi Sunak under intense pressure to alleviate the economic pain.

The Foundation said the peak of the "squeeze" looks set to be in April, when the energy bills cap is expected to rise by around £500 a year and the cost of energy firm failures adding another £100 to consumer bills – disproportionately affecting lowincome families.

Mr Bell said: “The overall picture is likely to be one of prices surging and pay packets stagnating.

"Real wages have already started falling, and are set to go into next Christmas barely higher than they are now.”

He added: "The peak of the squeeze will be in April, as families face a £1,200 income hit from soaring energy bills and tax rises.

"It's hard to see how the Government avoids stepping in."

A Government spokesman said ministers had put in place £4.2bn worth of "decisive action" to help support families with the cost of living.