Households facing ‘triple threat’ of rising inflation, energy price hikes and tax increases

Inflation in the UK increased to the highest rate for three decades in January as the impact of rising energy bills fed into a wide range of goods and services, adding to the squeeze on household living standards according to the latest Office for National Statistics (ONS) said the consumer price index measure of inflation increased to 5.5% in January from 5.4% a month earlier, driven by prices for clothing, footwear and furniture.

City economists had forecast the inflation rate to remain at 5.4%. The ONS said inflation was last higher in March 1992, when it stood at 7.1%.

With inflation predicted to hit more than 7% in April, the latest increase is expected to heap further pressure on the government, while putting the spotlight on the Bank of England to raise interest rates again.

Commenting on the figures, Joanna Elson CBE, Chief Executive of the Money Advice Trust, said “Households are facing a triple threat from rising inflation, energy price hikes and upcoming tax increases. For the many people whose budgets are already at breaking point, this is an incredibly worrying time, made harder knowing that energy prices are set to skyrocket in the coming months.”

“Government support announced last week will help a little but will not be enough. Further action, including significantly uprating benefits and increasing support through the Warm Homes Discount, is needed now to prevent more people from being pushed into financial difficulty. We are already seeing the impact at National Debtline and Business Debtline, with incomes not able to keep pace with the rising cost of essentials.”

Stuart Anderson, Chief Commercial Officer at Target Group, sais “Households across the UK have woken up to the news that inflation rises to 5.5%. Although pandemic restrictions have largely ended and things are beginning to return to normal, households are feeling the strain as income for essentials is being eaten up by rising prices.”

“A hike in commodity prices such as energy and gas is a big driver of increased inflation, but essentials such as clothing are driving prices up too now. Without any action or relief, it could signal that the economy is currently overheating.”

“Today’s announcement will no doubt cause additional stress for the most vulnerable in society and could see many others fall into financial troubles for the first time. It is more important than ever for banks and lenders to reach out to customers with empathy. Providers must work with those who have fallen behind on payments to encourage them to take control and manage their money against the unavoidable impact of inflation.”