Millions of workers could end up with almost the same wage packet next Christmas as this year. 

The Resolution Foundation says this, coupled with rising energy bills and tax rises will leave homes with a £1,200 a year hit to their incomes. 

The Foundation’s report predicted the start of this downward slope from April 2022, and called it ‘a cost of living catastrophe’.

Impact on households

It says it understands the Chancellor would be unable to do much in the short term to boost wages or curb inflammation, it believes the 6.6 per cent rise in the National Living Wage next April ‘should protect the lowest earners from shrinking pay packets.’

Meanwhile, TUC General Secretary Frances O’Grady stressed the need for ministers to work with unions and issued a direct challenge to the government to “give Britain a pay rise”. 

She said: “Families are bracing themselves for a cost-of-living storm in 2022. Bills are rising – fuel bills fastest of all. Millions of working households have been hit by the cut to universal credit – and will be hit next year by the hike to national insurance.  

“Our economy will only recover when working people can afford to spend in local shops and businesses. That’s the way to boost demand, grow the economy and protect jobs.” 

Calls for government action

The Resolution Foundation is also calling on the government to invest at least £450 million to reduce energy bills for the lowest earners. 

Among other suggestions, the Foundation says the government should extend and increase the Warm Homes Discount and help homes save further on their electricity bills by removing the environmental and social levies. This £160 household reduction in bills would cost around £4.5 billion.

Chief Executive of the Resolution Foundation, Torsten Bell said: “While the economic impact of this new wave (of Omicron) is uncertain, it should at least be short-lived. Instead, 2022 will be defined as the ‘year of the squeeze’.

He said the catastrophe facing households would be much worse if the government avoided stepping in: “Top of the Government’s New Year resolutions should be addressing April’s energy bills hike, particularly for the poorest households who will be hardest hit by rising gas and electricity bills.”

Frances O Grady also called on the government to enforce a pay of at least £10 an hour for workers in social care. She said: “The government can’t sit this wages crisis out. The pandemic showed us that our society keeps functioning because of the dedication of ordinary women and men, going to work day in, day out.