The biggest impact of the cost of living crisis is yet to come, according to new research which suggests the average household will be £2,100 worse off by the end of the next financial year.
Analysis from the Resolution Foundation think tank suggests families across the UK have only experienced half the lost income they are expected to suffer from falling living standards.
After housing costs the typical income for a working age family is set to fall 3% in the year to the end of March, then by 4% over the following 12 months.
The cumulative 7% drop will leave households worse off than they were before the pandemic until 2028, the think tank said.
The authors of the report said even though the crisis is not even at the halfway point, millions are already struggling to cope with the massive increase in costs they have seen.
They say nearly a quarter (23%) of adults who responded to its survey, equivalent to 12 million people around the country, said they could not afford to replace or repair their fridges, washing machines or other large electrical goods, compared with 8% before the COVID pandemic.
The researchers also found 11% said at some point over the last month they went hungry because they did not have enough money, while before the pandemic 5% said they went hungry for lack of money.
Among the poorest fifth of families, more than a third (34%) said their health has been affected by the rising cost of living.
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“Britain is only at the midpoint of a two-year income squeeze, which is set to leave typical families £2,100 worse off,” said Resolution Foundation researcher Lalitha Try.
“The crisis is already taking its toll on families, with over six million adults reporting they are going hungry as a result.
“Low-income families have been hit hardest by soaring energy bills and food prices, and are most likely to have seen both their financial circumstances and their health deteriorate.
“The government has rightly prioritised them in its crisis response – with support targeted at vulnerable households and tax rises hitting better-off families.”
Peter Marland, chair of the Local Government Association’s Resources Board, said: “Councils are urging the government to make the household support fund it has provided to councils permanent, alongside greater flexibility so they can ensure it helps people in the greatest need.
“This would also allow councils to crucially shift their focus from short-term crisis support to investing in preventative services which build financial capability and resilience, such as welfare benefit entitlement checks; debt advice; and employment, health, and housing support.”
The government has announced it will provide a £900 cost of living payment to millions of low income households from spring.
More than eight million people received payouts last year to help with spiralling energy costs.
In addition to the £900 payment from the Department for Work and Pensions (DWP), there will be a separate £150 payment for more than six million people with disabilities and £300 for over eight million pensioners to supplement their Winter Fuel Payments.
Chancellor Jeremy Hunt has acknowledged these are “tough times for families across the UK” but argued the payouts are “on top of above-inflation increases to working-age benefits and the energy price guarantee, which is insulating millions from even higher global gas prices”.
