Retirees face ‘one hell of a year’ cost of living | United Kingdom | News UK News

An electricity company boss has admitted there is “no doubt” the grim pressure of the cost of living will lead to the deaths of some elderly and vulnerable people. Caroline Abrahams, director of the charity Age UK, said: “Running inflation means this year is shaping up to be the year from hell for anyone on a low fixed income. “As frugal as they are, many older people are already struggling to get their pensions to extend to cover basic needs and the predictions that it will get even worse are truly frightening.” Pensioners are particularly at risk.

The state pension rose by a meager 3.1% – the rise in the consumer price index (CPI) in September last year.

But price increases are now over 6% and there are fears they could exceed double the figures later this year.

The spiraling crisis that is pushing households to the brink is blamed on the fallout from the pandemic response and the global consequences of Vladimir Putin’s war in Ukraine.

The CPI has already reached 6.2%, the highest since 1992.

The gradual increase in the cost of goods and services will push it up by 10% this year.

Paul Johnson, director of economics researchers at the Institute of Fiscal Studies, said: ‘The Chancellor’s economic forecaster – the usually very sober Office for Budget Responsibility – has told us that our standard of living will fall further this year. than any year since. comparable records started as early as the 1950s. More so than in the deepest recessions.

“Inflation has been driven to a 40-year high by a combination of the aftermath of Covid clogging supply chains around the world and soaring energy costs, particularly in the wake of war. .

“Meanwhile, earnings are not expected to rise as rapidly as prices. So most of us at work are going to see a big drop in the purchasing power of our pay packages. This will be a particularly heavy blow as profits have barely increased in more than a decade.

“The economy simply stopped being more productive as a result of the financial crisis. The last 15 years have been almost unique since the dawn of the industrial revolution in the way that real incomes have not increased.

The sobering report means that 2022 could be the darkest year and harshest winter in living memory for tens of millions of people.

It follows “April Cruel Day”, when every household was plunged into soaring energy bills.

National Insurance contributions have also risen by 1.25 percentage points, with workers earning more than £9,880 a year paying an extra 1.25 pence in the pound. Some 66million people were affected as gas and electricity costs soared 54% as regulator Ofgem raised the average price cap from £1,277 to £1,971.

Households may have to find an extra £700 from October as bills reach a jaw-dropping average of £2,700 a year.

The pressure has left millions unable to pay for a household emergency such as a repair. Who? Consumer rights editor Adam French said: ‘Research shows that a third of people would not be able to pay an unexpected £300 bill, either from their regular income or from their savings.

“Businesses and government must now be fully prepared to support the most vulnerable financially. If a company is increasing its bills, it should provide transparent and clear information up front…how its customers will be affected and what support is available.

Bill Bullen, founder of gas and electricity supplier Utilita Energy, claimed vulnerable people could die as the pressure mounts, predicting: “Next winter will be much worse and much worse for children too. “.

The government has given council tax rebates and tried to cut energy bills at a cost of £9billion, with the promise of an NI cut in July.

But Ms Abrahams said: ‘The government has not done enough for those who need extra support the most, such as elderly people on state pensions, people with disabilities and family carers. It should increase benefits and entitlements to match rising prices, as well as do more to help these people pay their energy bills.

“It’s becoming a national emergency, but so far the government is behaving like it’s just a minor issue. It’s a lot more than that if you can’t see how you’re going to pay your bills.

Economic inactivity affects a record 1.47 million men aged 50-64, an increase of 179,000 in two years and reversing a long-term downward trend. Data from the Office for National Statistics shows there are a further 609,000 people who have left the labor market altogether.

From December to February, 51% of unemployed men in this age group had been unemployed for at least 12 months. Stuart Lewis, chief executive of the Rest Less over-50s digital community, said: hitting an all-time high should set off some much-needed alarm bells.

“Workers in their 50s and 60s are less likely to receive on-the-job training.

“They are much more likely to end up in long-term unemployment.

“We are particularly worried about people who have not yet prepared themselves financially to stop working.

“It can leave people in a very vulnerable position with years, and in some cases more than a decade, to bridge the gap until they hit the state pension backstop.”

—————————————-

Commentary by Paul Johnson

Last month, the Office for Budget Responsibility told us that living standards would fall more this year than at any time since records began in the 1950s.

Many will see a sharp drop in purchasing power as wages fail to keep up with inflation.

The government wasn’t responsible for the Covid scrub supply chains or the war in Ukraine causing an energy spike, but it is raising taxes.

National Insurance is taking a larger share of revenue and taxes will reach their highest levels ever.

In the medium term, it helps to have the type of welfare state and NHS that is most needed. But this is not the case in the short term.

What is almost disconcerting, however, is to increase state benefits and pensions by only 3.1% with inflation more than doubling.

The government has given a council tax refund and reduced this year’s energy bills, which cost £9billion.

And a welcome reduction in National Insurance coming in July will more than offset the increase we have just had for anyone earning less than around £35,000. But income tax will take a larger share because the point at which you start paying it has been frozen.

And the measures of the municipal tax and the February energy bill now seem insufficient.

But, as Chancellor Rishi Sunak said, the government cannot protect us all forever. The UK is poorer because of Covid and Ukraine and we will have to learn to live with it.

Besides, it will be less painful than for previous generations. They had less to start with.

• Paul Johnson is Director of the Institute for Tax Studies