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Resolution Foundation analysis says working families are £2,900 a year worse off than they would have been if inflation had stayed near 2% annually over the past five years. The report attributes the squeeze to successive global shocks and warns that high energy costs continue to pressure households, while public finances limit the scope for broad government support.
Working families are £2,900 a year worse off than they would have been if inflation had stayed near its usual 2% annual rate, according to new Resolution Foundation analysis of the past five years. The think-tank says successive economic shocks pushed prices sharply higher, with energy and other essential costs weighing especially heavily on lower-income households.
The analysis compares household finances with a counterfactual in which prices rose at about 2% a year. It says the shocks of the past five years produced the equivalent of 13 years of inflation at that rate, and that prices by summer 2026 were nearly 30% higher than in 2021. The £2,900 figure is an estimate of how much worse off working families are each year against that alternative path, not a reported bill or a measure of every household’s individual loss.
The report describes households responding to higher prices by turning down heating or falling behind on bills. It says lower-income families have been hit harder because prices for essentials rose and those items take up a larger share of their budgets. Energy costs, in particular, have affected household bills and contributed to higher food prices, according to the think-tank.
The report was published amid renewed pressure on household budgets. The source article said five-year mortgage deals had topped 6% that week, while energy bills were already at their highest level in three years and were expected to rise by a further 16% in January. Those are reported market conditions and forecasts; the supplied material does not specify the exact tariff or mortgage products covered.
Household budgets face renewed pressure
The estimate matters because it puts a scale on the gap between households’ actual experience and a lower-inflation scenario. Prices nearly 30% above 2021 levels leave families paying more for everyday goods and services, even if inflation later slows: a slower rise in prices does not, by itself, reverse earlier increases.
The impact is uneven. The Resolution Foundation says poorer households devote more of their spending to necessities, making them more exposed when food and energy costs rise. Its account of households reducing heating or missing bills points to pressure extending beyond discretionary spending. The report does not provide a household-by-household breakdown in the supplied material, so the £2,900 annual estimate should not be read as the same loss for every working family.
There is also a policy constraint. The foundation argues that the government has less fiscal room to respond than during earlier crises. If assistance is limited and targeted, some middle-income households may not qualify even as they face higher mortgage and energy costs. The report’s figures do not establish what support ministers will provide or how many households would receive it.
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Five years of inflation shocks
The report traces the price surge to a series of shocks. It identifies pandemic-era supply-chain disruption as an early driver, as economies reopened and demand recovered. Russia’s full-scale invasion of Ukraine in 2022 then contributed to higher inflation, which the source says reached as much as 11%. More recently, the article links rising oil and gas prices to disruption to energy supplies from the Middle East amid war in the region.
These events are presented as successive pressures rather than as a claim that one cause explains all price increases. Energy costs were described by the foundation as being at the “epicentre” of the squeeze and as a factor feeding into food prices. The report’s comparison with a 2% inflation path is intended to show how far prices diverged from a more normal rate; it is not a forecast of what prices would actually have been under different global events.
The news report also cited practical and financial pressures facing consumers: the AA had advised drivers to accelerate gently to save fuel, and mortgage rates had risen. It said energy bills were expected to rise in January. These details underline that the analysis appeared as households faced continuing costs, but the supplied source does not establish how those individual pressures are incorporated into the £2,900 estimate.
“Unfortunately, help is needed just when the public finances leave less room than ever to provide it.”
— James Smith, chief economist at the Resolution Foundation
How the £2,900 estimate is calculated
The supplied report summary does not give the full methodology behind the £2,900-a-year estimate, including which household types are included, how income and tax changes are treated, or whether the figure is an average across working families. It also does not state the exact price index or calculation period used for that estimate. Readers should treat it as the foundation’s modelled comparison, not a uniform loss experienced by every family.
It is also unclear from the source material how the projected 16% January energy-bill rise was calculated, which customers or tariffs it applies to, or whether later policy changes could affect it. The report’s account of the Middle East conflict and energy disruption reflects the situation described at publication; the duration and eventual effect on prices are not established here.
The analysis says government finances restrict the scope for assistance, but it does not set out a final government policy, eligibility rules, funding total or timetable. The possibility that middle-income households may be left without support is presented as a warning, not a confirmed decision.
Energy bills and support decisions
The next immediate pressure identified in the source is the forecast energy-bill increase in January. Its actual effect will depend on the eventual price level, household circumstances and any changes to policy or supply costs. The source material does not provide a confirmed final bill figure for individual customers.
Attention will also turn to whether the government announces help and, if it does, how it is targeted. The Resolution Foundation is urging ministers to prioritize poorer families and energy bills, but that is the think-tank’s recommendation rather than a government commitment. Further assessment of the household impact will depend on published policy details and updated price and inflation data.
Key Questions
What does the £2,900 figure mean?
It is the Resolution Foundation’s estimate of how much worse off working families are per year compared with a scenario in which inflation had remained near 2% annually over the past five years. It is not a bill charged to each family, and the supplied material does not show that every household lost the same amount.
Why does the report say prices rose so sharply?
The foundation points to pandemic-related supply-chain disruption, the effects of Russia’s invasion of Ukraine and more recent disruption to Middle Eastern energy supplies. It says energy costs also fed into higher food prices.
Who has been hit hardest?
The report says poorer households have faced steeper pressure because essential items make up a larger share of their spending. It describes some households reducing heating or falling behind on bills.
Will the government provide more cost-of-living support?
The source does not report a confirmed new support package. The Resolution Foundation’s chief economist argues that any future help should be targeted at poorer families, especially to address energy bills, while warning that public finances limit the scope for broad assistance.
Are energy bills definitely rising by 16% in January?
The source article reports a 16% rise as an expectation, not as a confirmed final bill change for every household. It does not specify the tariffs covered or whether later developments could alter the forecast.
Source: rss
