2023 predicted to be ‘groundhog year’ for families as bills rise and pay packets shrink

Rising bills and shrinking pay packets are among the factors which will make 2023 a “groundhog year” for families, a think tank has warned.

Coming on the back of an average £800 fall in each household’s real disposable incomes in 2022, 2023 will see another similar drop thanks to a £900 rise in energy bills and £700 tax rise for the average household – only slightly mitigated by increases in benefits and minimum wage.

“2023 should see the back of double-digit inflation, but it also looks set to be a groundhog year for family finances: things will get far worse before they start to get better,” wrote Torsten Bell, chief executive of the Resolution Foundation.

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Around two million households will see their mortgages increase, with an average hit of £3,000 a year for a fixed-rate mortgage.

However, inflation is set to fall from record double-digit levels seen in 2022. That doesn’t mean it’s not rising – as long as it is positive, prices are still rising.

Bell warned that households will see a hit to their incomes similar to the average £800 hit suffered in 2022. Analysis by the Resolution Foundation of the Office for Budget Responsibility’s (OBR’s) forecasts shows household incomes are set by to fall by another 3.8 per cent – or £880 per household – in 2023.

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“We have spent the past year talking about higher energy costs, but for consumers a record energy bill rise actually lies ahead of us. This will be felt by consumers from April when the Energy Price Guarantee rises to £3,000 for a typical energy user,” wrote Bell.

Meanwhile, earnings are predicted to fall in real terms until the middle of 2023 – and will only exceed 2022 levels by 2028, according to Resolution Foundation analysis.

This will be compounded by tax rises, as Rishi Sunak and Jeremy Hunt freeze tax thresholds.

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