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Resolution Foundation analysis says working families are £2,900 a year worse off than they would have been if inflation had stayed near 2% annually over the past five years. The report links the squeeze to successive global shocks and says poorer households have been hit hardest, while warning that government support may be constrained by public finances.
Working families are £2,900 a year worse off than they would have been if inflation had stayed near its normal rate of 2% over the past five years, according to new analysis by the Resolution Foundation. The think-tank says repeated price shocks have pushed up household costs, with poorer families facing the greatest pressure and less scope for the government to repeat broad support offered during the 2022 energy crisis.
The report compares what households have experienced with a counterfactual in which prices rose by around 2% a year. It says the shocks of the past five years added the equivalent of 13 years of inflation at that rate. By this summer, prices were nearly 30% higher than in 2021, the analysis says. The £2,900 figure is an annual measure of how much worse off working families are relative to that comparison, not a claim that every household has lost the same amount.
The foundation traces the price surge to several events: supply-chain disruption as the global economy reopened after Covid, Russia’s full-scale invasion of Ukraine in 2022, and more recent conflict affecting energy supplies in the Middle East. The report says energy costs have been at the centre of the squeeze and have also fed into higher food prices. Inflation reached as high as 11% during the period, according to the source report.
Households have responded in different ways. The analysis describes people turning down heating or falling behind on bills. It says lower-income households have been hit harder because the prices of essentials have risen faster and those items take up a larger share of their budgets. The report arrives amid further pressure from fuel and mortgage costs and an expected rise in energy bills next January.
Why Lower-Income Households Feel More
The findings matter because the pressure is not evenly distributed. When essentials such as energy and food take a greater share of a household’s income, price rises leave less room for other spending and make it harder to absorb unexpected bills. The report’s account of households reducing heating or falling behind on payments points to consequences beyond a higher shopping or energy bill.
The analysis also sets out a constraint on the policy response. The Resolution Foundation warns that the government has less room in the public finances to provide assistance than during earlier crises. If support is limited to targeted help, some middle-income households facing higher costs may not qualify, even as they feel a squeeze. The report does not specify which households would receive future assistance or how it would be designed.
Current costs could add to the strain. The source article says average five-year mortgage deals topped 6% that week for the first time in three years, while energy bills were expected to rise by 16% next January. Those are reported outlook figures, not a guarantee of what every household will pay: individual mortgage rates and energy bills depend on circumstances and subsequent changes.
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Five Years of Successive Price Shocks
The report’s comparison begins with a hypothetical path in which inflation remained close to the Bank of England’s usual 2% target. Instead, household costs were affected by multiple shocks in succession. Covid-era supply disruptions came as economies reopened, followed by Russia’s invasion of Ukraine in 2022, which the report links to a sharp rise in inflation. More recently, the source article attributes higher oil and gas prices to conflict in the Middle East disrupting energy supplies.
This sequence helps explain why the analysis counts the period as equivalent to 13 years of inflation at 2% annually. That is a comparison of cumulative price rises, rather than a statement that inflation remained at one rate throughout. The report says prices were nearly 30% above their 2021 level by this summer.
The source article describes immediate pressures alongside the five-year comparison: fuel costs, mortgage rates and energy bills. It also reports that the AA had advised motorists to accelerate gently to save fuel. These details illustrate the range of household costs under pressure, but the £2,900 estimate itself comes from the Resolution Foundation’s analysis, not from a household-by-household bill calculation.
“Unfortunately, help is needed just when the public finances leave less room than ever to provide it.”
— James Smith, chief economist at the Resolution Foundation
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How the £2,900 Estimate Applies
The source material does not provide the full report’s methodology, the precise definition of a “working family,” or a breakdown showing how the £2,900 estimate varies by income, household size or region. It is a comparison against inflation of around 2% a year, so it should not be read as a direct calculation of the cash loss experienced by every family.
The account also gives no confirmed policy package in response to the findings. It does not establish how much any future energy-bill support would cost, who would be eligible, or whether the government will adopt the think-tank’s recommendation. Forecast energy-bill changes and the effects of current conflicts could also change as conditions develop.
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Government Response and Winter Bills
The next developments to watch are the government’s response to the report and the details of energy bills due next January. The source article says bills were already at their highest level in three years and were expected to rise by 16%; the final amount households pay will depend on the applicable price arrangements and any policy changes.
The Resolution Foundation is calling for any new support to be targeted at poorer families, beginning with energy bills. Until ministers set out a policy, the eligibility rules, amount of assistance and funding remain unknown. Households will also continue to face changing fuel, mortgage and food costs, while the underlying effect of the past five years is measured against the report’s 2% inflation comparison.
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Key Questions
What does the £2,900 figure mean?
It is the Resolution Foundation’s estimate of how much worse off working families are per year compared with a scenario in which inflation had stayed around 2% annually over the past five years. It does not mean every family has lost exactly £2,900.
What caused the cost-of-living squeeze?
The report points to supply-chain disruption after the Covid pandemic, Russia’s invasion of Ukraine in 2022, and more recent conflict affecting energy supplies in the Middle East. It says energy prices also contributed to higher food costs.
Which households have been hit hardest?
The foundation says poorer households have faced greater pressure because essential goods and services account for a larger share of their spending and their prices rose sharply.
Will the government provide more cost-of-living support?
No new support package is confirmed in the source material. The Resolution Foundation argues that any further help should be targeted at poorer families, particularly for energy bills, and says public finances leave less room for broad assistance.
Are energy bills expected to rise?
The source article reports an expected 16% rise next January. That is an outlook figure, not a confirmed bill increase for every household, and the eventual impact may depend on later conditions and policy decisions.
Source: rss
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