Destitute households to spike after National Insurance rise, says think tank

The number of destitute UK households might rise by nearly a third to more than one million this spring as the government is set to add an increase in national insurance to the wider cost of living squeeze, a think tank has warned.

According to the National Institute of Economic and Social Research (NIESR), destitution – which it defines as an inability to buy basic essentials – could increase by 30 percent in the next financial year if households are faced with a combination of rising inflation, higher bills and a greater tax burden.

Accusing the government of  “powering down, not levelling up”, the thinktank said cost-of-living pressures were hitting the lowest-income households hardest, as they spend a greater proportion of their income on food and fuel.

NIESR added that Chancellor Rishi Sunak should also increase government spending in his forthcoming budget to boost investment and allow public services to cope with higher inflation.

As per NIESR, such households are “heavily concentrated in some of the most economically deprived areas of the country, including parts of the north-west, Wales and pockets in London and the south-east”.

NIESR director Jagjit Chadha  accused the government of prematurely withdrawing its Covid-19 support measures, arguing that it limited the central bank’s ability to tackle rising prices.

“The government has chosen to tighten primarily through fiscal policy, leaving monetary policy lagging the inflation cycle. This policy sequencing is the wrong way round,” he said.

He said banks were forced to maintain ultra-low interest rates to prevent bankruptcies and hardship among poorer households when financial protection should be the Treasury’s job.

Sunak is due to present new budget forecasts to parliament on March 23.