FAMILIES are facing a £1,200 real terms cut in income this year, piling pressure on the UK Government to intervene, a leading thinktank has said.

The Resolution Foundation said 2022 was set to be “the year of the squeeze” with soaring energy prices adding around £600 to household bills.

Soaring inflation, wage stagnation, and tax and national insurance changes add another £600.

Although for better off families the NICs increase alone could cost an average of £750.

The foundation’s chief executive, Torsten Bell, predicted the cost of living squeeze would be the biggest political issue facing Boris Johnson other than the pandemic.

April, when some income tax thresholds are frozen and a 1.25% increase in national insurance contributions takes effect, is set to be the peak of the problem. 

The Bank of England expects inflation to hit around 6 per cent in the spring, eroding any recent wage increases.

The energy price cap on household bills is also expected to rise by around £500 a year, with the aftermath of energy firm failures adding another £100 to bills.

The Foundation said the cumulative effect would affect low-income households hardest, with the poorest having to spend 12% of their income on energy, up from 8.5%.  

Many of the same families will also see a £20-a-week cut in their universal credit, after the UK Government reversed a pandemic–related uplift in the benefit.

At the same time, rising inflation means wages next Christmas are forecast to be no higher in real terms than they are this year.

Mr Bell Bell told BBC Radio 4’s Today: “If you think about the politics of this, energy prices and taxes are always big politics in Britain.

“The fact that two such big changes are coming on top of each other in April, at the same time as our wages aren’t rising that significantly because of higher inflation in general, I think means that this is going to be the dominant story once we come out of the bad but hopefully short-lived Omicron wave.”

He said the “squeeze” on living standards was likely to be so severe that Chancellor Rishi Sunak would come under intense pressure to act to alleviate the economic pain.

Tory MPs fear a cost of living crisis could add to the UK Government’s woes after a catalogue of problems and scandals just before Christmas.

The Foundation said real wages, which were flat in October, had “almost certainly” started to fall and would not pick up again until the end of 2022, leaving real pay just 0.1% higher than it was at the start of the year.

Mr Bell added: “The peak of the squeeze will be in April, as families face a £1,200 income hit from soaring energy bills and tax rises. So large is this overnight cost-of-living catastrophe that it’s hard to see how the Government avoids stepping in.”

Shadow work and pensions secretary Jonathan Ashworth said the Prime Minister was “nowhere to be seen” on the issue.

He told Sky News: “He could take VAT off the energy bills – that would cushion this for many, many families. In fact, you’re going to have families worse off, you’re going to have pensioners who are now facing the prospect of shivering in the cold or going without hot meals because of these rising (bills).”

A UK Government spokesman said ministers had put in place £4.2 billion worth of “decisive action” to help support families with the cost of living.

This includes reducing the Universal Credit taper - worth over £2 billion - and a range of measures to help with bills, including the energy price cap and cold weather payments, as well as freezing alcohol and fuel duty.