UK households have paid almost £14,000 on average in additional costs for mortgages, loans, energy and water bills over the past five years, according to a Trades Union Congress report urging the chancellor to tackle soaring living costs at next month's budget.
With less than a fortnight until John Healey presents his first budget as chancellor on 28 October, the TUC said the cost of living crisis was weighing on the economy as households held back on spending. Analysis of official figures by the union umbrella body found British households had paid an additional £13,961 on bills on average since 2021, an extra £2,792 a year, amid soaring inflation triggered by the exit from the Covid pandemic and wars in Ukraine and the Middle East.
Paul Nowak, the TUC general secretary, said: "From austerity to the pandemic to energy shocks and Trumpflation, working people have borne the brunt of crisis after crisis. When the crackpots in the White House or the Kremlin launch an illegal war, everyone pays the price in their bills."
The TUC said the UK had recorded the weakest growth in consumer spending in the G7 since before the pandemic.
At Labour's conference in Liverpool, Healey pledged to use the budget to give households "breathing space" but warned that the government had limited resources to soften the global economic shock hitting Britain. The Treasury has been preparing a "tightly focused" budget to limit the potential for a market backlash, and the International Monetary Fund this week urged Healey to "stay the course" to cut the budget deficit amid rising borrowing costs.
Healey faces growing pressure to act before winter amid predictions that typical consumer energy bills could reach £2,000 a year from January. Retail industry bosses pressed him for support in Downing Street meetings on Tuesday. The Confederation of British Industry called for a cut in employer national insurance contributions, lower business electricity costs, changes to business rates and measures to support private investment.
Separately, the IPPR thinktank urged Healey to raise £16bn, mostly through a rise in capital gains tax softened by a new entrepreneur "super exemption". It was reported on Tuesday that Healey had rejected calls from Labour MPs and thinktanks to equalise the rates at which capital gains and income from work are taxed.
Analysis
Why This Matters
- The report puts the average added burden on UK households at £2,792 a year, with energy bills predicted to rise further for a typical household from January.
- The 28 October budget is the government's main chance to respond, but the chancellor has already warned that public resources are limited.
- Weak consumer spending growth, the slowest in the G7 since before the pandemic, suggests the squeeze on households is also holding back the wider economy.
Background
The UK's cost of living squeeze began with a surge in inflation from 2021, as economies reopening after the pandemic hit supply chain disruption, and intensified when energy prices spiked following Russia's full-scale invasion of Ukraine. Central banks raised interest rates to cool inflation, pushing up mortgage and loan costs, and while inflation has since eased, prices remain far above pre-crisis levels. The TUC's figures count the cumulative effect of those pressures on household bills since 2021.
Key Perspectives
TUC: Working people have borne the brunt of successive economic shocks, and the chancellor should use the budget to give households support.
Business groups: Retailers pressed the chancellor for help in Downing Street meetings, and the CBI wants cuts to employer national insurance, lower business electricity costs, business rates reform and measures to support private investment.
IPPR thinktank: Urges the chancellor to raise £16bn, mostly through a capital gains tax rise, softened by a new entrepreneur "super exemption".
Fiscal hawks: The IMF has urged Healey to "stay the course" on cutting the deficit, and the Treasury is preparing a "tightly focused" budget to avoid a market backlash. Healey has reportedly already rejected calls to equalise capital gains tax with income tax rates.
What to Watch
- The budget statement on 28 October and what household support measures it contains.
- Whether typical consumer energy bills do reach £2,000 a year from January, which would intensify pressure for intervention.
- Financial market reaction to the budget, given Treasury concerns about rising borrowing costs.