Study shows Wales' poorest households are set to be hit hardest by the cost-of-living crisis this year

A Cardiff University study’s revealed energy price hikes and tax rises will leave Welsh households an average £600 a year worse off.

The briefing paper from the University’s Wales Governance Centre suggests that even after measures to assist cost-of-living are applied, the poorest households will be hit hardest. An by price rises.

Last month, the Welsh Government announced it was allocating nearly £340 million towards cost-of-living measures. But researchers predict further support may be needed over the coming months.

Report author Cian Siôn, part of the Wales Fiscal Analysis Team, said:

“Despite the interventions made by the UK and Welsh governments, a combination of inflationary pressures, tax rises and trailing income growth mean householders in the UK face the biggest squeeze in living standards in decades.

“The worrying developments in Ukraine have increased the likelihood that energy prices will remain high. Although the measures introduced by the UK Government will alleviate the impact on households to some degree, and the additional targeted support announced by the Welsh Government has helped curb the impact on those on the lowest incomes, households of all incomes will still be worse off this spring.”

Both the UK and Welsh governments have announced measures to help mitigate the impact of rising prices – particularly the soaring cost of energy – on households.

But using a tax-benefit model, researchers have calculated that even after this support is taken into account for households, they will still be on average, £600 a year worse off from April onwards

In January, the 12-month Consumer Price Inflation (CPI) rate reached 5.5%, up from 5.4% in the 12 months to December 2021. The Bank of England now expects the CPI rate to peak above 7% in Spring 2022 – its highest level in three decades.

Cian Siôn added:

“The next few months are going to be challenging and these pressures will hit those on the poorest incomes the most. We know that even before recent price rises, households with the poorest incomes spent more than twice as much on housing and utilities as a proportion of their disposable income than their counterparts on the highest incomes.

“In addition to this, there remains considerable uncertainty about how high the inflation rate will climb and how entrenched price rises will be across all aspects of our lives. If high price levels persist for a prolonged period without real growth in income, this may not be the last time governments are compelled to intervene to assist with the cost of living.”