Middle-class households in the UK are set to be £480 worse off this year due to rising fuel prices and energy bills driven by the conflict in the Middle East, according to the Resolution Foundation. The think tank had previously projected a £300 boost for these households, but the ongoing war has reversed expectations.
The analysis indicates that the average household's income will shrink by 0.6% this year, compared to a previously forecast 0.9% improvement. Lower-income households will see a 1.2% increase in incomes, down from an earlier projection of 2.8%, while those with three or more children in the bottom half of earners will benefit from a 7.7% rise due to the abolition of the two-child benefit cap.
The energy price cap remains at £1,641 until June, but analysts at Cornwall Insight warn it could rise by up to £288 for the average household. Petrol prices are assumed at £1.50 per litre and diesel at £1.80, consistent with Brent crude at $100 a barrel. Although Brent fell to $95 after a ceasefire announcement, failed peace talks threaten further increases.
James Smith, chief economist at the Resolution Foundation, said: 'Despite hopes for a sustained peace, the path of this conflict remains uncertain and energy prices remain well above pre-war levels, meaning many households face a decline in their purchasing power this year.' He urged the government to prepare a social tariff to support struggling households.
Chancellor Rachel Reeves stated the government is focused on the hardest hit, with measures including £150 off energy bills, an extended 5p fuel duty cut, and support for heating oil users. A Treasury spokesperson said: 'We know consumers are paying more because of the war in the Middle East. This is not our war and that is why we did not join it.'
