Households across the country are facing a livelihood crisis as inflation and energy bills continue to rise, but Boris Johnson and Rishi Sunak are not helping the people
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Boris Johnson faced more calls this evening to urgently tackle the cost of living crisis after the Bank of England warned the UK was now heading for a recession.
Governor Andrew Bailey painted the bleakest economic outlook since the 1980s with an announcement that could plunge millions more households into poverty.
He said Brits were facing a quadruple blow, inflation at 10%, energy bills at nearly £3,000 a year, interest rates rising from 0.75% to 1% and unemployment at 5.4%.
With families already struggling to make ends meet due to crippling price hikes, Mr Johnson’s procrastination has done little to ease the pain.
But activists called for the prime minister to act now to help those facing an even tougher future.
Mr Johnson has again been urged to introduce a windfall tax on oil companies that have just reaped huge profits.
TUC Economics Director Kate Bell said: “We need an emergency budget to help families.
“And it should include a windfall tax on excess profits from oil and gas, with proceeds used to help households with bills and energy efficiency.”
The Joseph Rowntree Foundation estimates the average household will be £1,200 worse off this year.
Research leader Dave Innes added: “This shows that we are far from the end of this crisis as the threat of recession and rising unemployment add to the economic shocks to come.
“The government needs to ensure that benefits are at least increased to reflect actual increases in the cost of living.
“The social security system was woefully inadequate even before the cost of basic necessities began to skyrocket, and urgently needs to be strengthened if we are to protect people from the harm that could be done.”
Unite union leader Sharon Graham said: “Workers are being pounded on all sides.” And Gary Smith, general secretary of the GMB union, added: “The Bank of England interest rate announcement is all pain and no gain.”
Richard Lane of debt relief organization StepChange said: “The level of support being offered by the government is not sufficient to mitigate the twin burdens of rising inflation and interest rates that the country is facing.”
The bank’s monetary policy report revealed the impact that everything from skyrocketing energy prices to Russia’s war in Ukraine is having on households across the country – with the full brunt that is yet to be felt.
The main driver of inflation is a surge in global energy prices, which had been rising dramatically before the Russian invasion of Ukraine in March.
Regulator Ofgem raised prices for 22 million homes by a record average of 54% last month, taking a typical annual bill to £1,971.
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But the bank today primed households that October will see it rise by a further 40%, taking payments to £2,800 a year.
The jump is likely to push inflation – already at a 30-year high of 7% – above 10% in October, the highest level since 1982.
And the bank showered borrowers with another rate hike today even as households face the second worst income squeeze since the 1960s.
Mr Bailey said: “I recognize the hardship this will cause for many people in the UK, particularly those on the lowest incomes, often with little or no savings.”
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He predicted the economy could contract in the last three months of 2022 and stay below zero next year. And Mr Bailey warned the UK could face a “very sharp slowdown”. Others fear that we are headed for a period of “stagflation” – little or no economic growth coupled with high inflation.
The bank said this means households’ real disposable incomes will fall by 1.75% this year. That would be the largest drop since records began in 1964, excluding 2011.
Money markets are predicting that the key interest rate will rise to 2.5% next year.
However, Bank of England minutes doubt whether this will be necessary. It projected that inflation would fall to just over 2% in two years – the bank’s target – and then to 1.3% in three years. But by then the unemployment rate is expected to have risen to 5.4%.
While most households who have a mortgage have fixed-rate contracts, the rate hike to 1% will boost repayments for around two million adjustable-rate borrowers. It could also raise interest rates on credit cards and personal loans.
Joanna Elson, Chief Executive of Money Advice Trust, said: “Today’s rate hike, while small in scale, is a potential source of concern for people with significant amounts of credit when viewed in the context of rising costs across the board.
“We know that any small increase in costs can cause problems for households with stretched budgets.
“With no abatement in sight from soaring energy, fuel and food prices, more support is now needed for the many households already on the sharp end of the cost-of-living crisis.”
https://www.mirror.co.uk/money/cost-living-now-bleakest-1980s-26886766 Cost of living now at lowest since 1980s - but still no help for families