Households were facing the biggest hit to their living standards since the 1950s as new support measures were announced on Wednesday.
The Office for Budget Responsibility (OBR) outlined a short-term outlook where “real household disposable incomes per person fall by 2.2% in 2022-23, the largest fall in a single financial year since ONS records began in 1956-57.”
The OBR said: “Petrol prices are already up a fifth since our October forecast and household energy bills are set to jump by 54% in April.
“If wholesale energy prices remain as high as markets expect, energy bills are set to rise around another 40% in October, pushing inflation to a 40-year high of 8.7% in the fourth quarter of 2022.”
The OBR added that: “Taking account of both energy and non-energy pressures on household incomes, the policy measures announced since October offset a third of the overall fall in living standards that would otherwise have occurred in the coming 12 months.”
According to the Institute for Fiscal Studies (IFS) think-tank, bringing together the expected changes in earnings, the reforms to taxes, and the energy measures announced in February, a middle earner on £27,500 per year can expect to be about £360 worse off this year than they were last.