Families facing ‘income squeeze’ in 2022

Families across the UK are facing an income squeeze in the new year, according to a new report.

Real wages are set to be no higher next Christmas than they are today, while tax rises and soaring energy bills will hit income to the tune of £1,200.

However, in brighter news the economic impact of Omicron is expected to be short lived.

The research is part of the Resolution Foundation’s latest quarterly Labour Market Outlook, which notes that real wage growth – flat since October – is unlikely to start growing again until the final quarter of 2022.

The means real wages are set to be only 0.1% higher at the end of 2022 than at the start.

The longer-term outlook for wages is even more pessimistic, with them set to be £740 a year lower by the end of 2024 than the already sluggish pre-pandemic projection.

A typical energy bill is likely to rise by £600 following an increase to the energy bill cap and attempts to recoup the costs of energy company failures.

This is set to disproportionately impact low-income families, with their share of income spent on energy set to rise from 8.5% to 12%.

Higher income families will be hit disproportionately by tax rises. The income tax freeze and the 1.25 increase in personal national insurance contributions will typically costs households £600.

But families in the top half of the income distribution will experience a £750 hit on average due to the national insurance rise alone.

Torsten Bell, chief executive of the foundation, said: “2022 will begin with Omicron at the forefront of everyone’s minds. But while the economic impact of this new wave is uncertain, it should at least be short-lived. Instead, 2022 will be defined as the ‘year of the squeeze’.

He added: “Top of the government’s new year resolutions should be addressing April’s energy bills hike, particularly for the poorest households who will be hardest hit by rising gas and electricity bills.”