Families facing ‘very real possibility of destitution this winter’, top economist warns

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Economists have warned that many across the UK could be facing 'destitution' by the winter due to rocketing energy costs and inflation (Getty)

A top economist has warned there is a "very real possibility of destitution for many this winter" as the cost-of-living crisis continues to spiral.

James Smith, research director at independent thinktank the Resolution Foundation, said the Bank of England's (BoE) latest "dire forecasts" mean the crisis will last longer and hit households harder than previously anticipated.

Last week, the BoE warned the nation faces a 15-month recession and inflation of more than 13% later this year.

In a bid to curb rocketing prices, it raised interest rates from 1.25% to 1.75%, the biggest rise for 27 years, a move which will put new pressure on mortgage holders and borrowers.

Smith said the Bank's forecasts "lay bare the challenges facing the next prime minister".

He added: "The reality is that whoever steps into Downing Street this September will face an immediate challenge to provide targeted support to avoid the very real possibility of destitution for many this winter".

The Bank of England has warned inflation will hit 13.1% by the end of the year (Yahoo News UK)
The Bank of England has warned inflation will hit 13.1% by the end of the year (Yahoo News UK)

Last week, energy consultancy Cornwall Insight warned that energy bills could hit £3,359 per year from October for the average household.

At the start of this year, the average energy bill was £1,277 annually.

Moreover Ofgem - the energy industry regulator - announced its price cap will be changed every three months from October, with adjustments having previously been every six months, meaning bills will rise again in January.

Energy bills are expected to rocket even further in the coming months (Yahoo News UK)
Energy bills are expected to rocket even further in the coming months (Yahoo News UK)

Ofgem said it is changing the price cap update to quarterly because the market is moving so quickly and it is not sustainable for people to pay a rate up to six months old.

As the UK's economy continues to face ever-worsening conditions, pressure is growing on the next prime minister to take further action.

Liz Truss, the frontrunner in the Conservative leadership contest, has committed to holding an emergency budget if she becomes PM next month, where she would scrap the national insurance increase and the proposed rise in corporation tax.

Rival Rishi Sunak attacked her plans, describing them as a “big bung” for large businesses and the better off, which would do little to help those most in need over the coming winter.

Sunak said her plans to scrap the national insurance hike, which he brought in as chancellor to fund the NHS and social care, would leave someone on the national living wage less than £60 a year better off, while pensioners would not get a penny.

The former chancellor has said he would get inflation under control before bringing in tax cuts.

In an interview with the Sunday Times last week, Sunak outlined plans for another multi-billion pound package to ease the cost of living crisis.

Meanwhile, former prime minister Gordon Brown has demanded the government come up with an emergency budget this week.

Writing in The Observer, Brown said: “A financial timebomb will explode for families in October as a second round of fuel price rises in six months sends shockwaves through every household and pushes millions over the edge.

“A few months ago... York University estimated that April’s 54% increase in fuel prices would trap 27 million people in 10m households in fuel poverty.

“Now, 35 million people in 13m households – an unprecedented 49.6% of the population of the United Kingdom – are under threat of fuel poverty in October.”

Brown urged Truss, Sunak, and Boris Johnson to join forces and address the issue now.