Households face the worst income squeeze for generations, experts warn, as the Ukraine crisis drives a fresh surge in the price of oil and gas.
Think tank the Resolution Foundation predicts inflation could jump towards a 40-year high, with the average family facing a £1,000 a year hit.
Levelling-Up Secretary Michael Gove hinted Rishi Sunak - who will give his Spring Statement on March 23 - could have to come forward with extra help.
He told LBC Radio: “All the evidence is that our Chancellor, whenever there’s been a challenge, has risen to that challenge to support those most in need.”
It came as oil hit a near 14-year high of $139 a barrel yesterday after the US hinted at a ban on buying Russian energy.
A recent surge in the cost of oil is already impacting drivers here, with the nationwide average for petrol topping a record 155p a litre, said motoring group the AA.
Diesel is now averaging 161.28p a litre, it added.
“A year ago, with pump prices rising steadily after the pandemic slump, 125p a litre was bad news, but 155p was unimaginable,” says Luke Bosdet, the AA’s spokesman on fuel prices.
Campaign group FairFuelUK highlighted a forecourt in Glasgow it says is charging 173.9p for diesel.
It warned: “We are reliably informed petrol and diesel prices are to rocket even further by 10p to 20p per litre this coming week.”
Reports say US President Biden is willing to move ahead with a ban on Russian oil imports, without the participation of allies in Europe.
It came as wholesale gas prices rocketed to a new record high yesterday.
Here, the day-ahead gas price jumped 28.2% to 600p per therm, having at one stage spiked at 625p.
The leap threatens to feed through to higher energy bills for already cost of living crisis hammered households.
Some experts warn average gas and electricity bills could top £3,000 a year from October.
The Resolution Foundation, in a report out today, predicts inflation could jump to more than 8% in the spring, from 5.5% now.
That will far outstrip wages rises and increases in benefits and comes amid a wave of tax rises, including national insurance.
According to the study, the combination will lead typical household incomes to tumble by 4%, the sharpest fall since the mid-1970s, and blow a £1,000 a year hole in the average household’s budget.
Adam Corlett, principal economist at the Resolution Foundation, said: “Britain has stepped out of a global pandemic, and straight into a cost of living crisis.
“The tragic conflict in Ukraine is likely to further drive up the price of energy and other goods, and worsen the squeeze on incomes that families across Britain are facing. “Inflation may even exceed the peak seen during the early 1990s, and household incomes are set for falls not seen outside of recessions.
“For millions of low-and-middle-income families, this inflation-driven squeeze will be made worse by a living standards rollercoaster.”
Mr Gove admitted it could be like the financial woes of the mid-1970s.
He said: “After the 1973 Yom Kippur war, all prices spiked and that had an effect there.
“We all know there are real cost of living challenges.”
Shadow Chancellor Rachel Reeves said: “The findings that people are facing the biggest living standards squeeze since the mid-1970s are extremely worrying, and make it more urgent than ever that the Chancellor cancels his planned National Insurance hike.
“The government has allowed the cost of living crisis to spiral out of control since September, refusing to take action - and in fact proposing now to make it worse with an unfair tax hike.
“The Conservatives should halt their planned National Insurance hike in April – and they must look again at Labour ’s proposal for a one-off windfall tax on oil and gas producers to cut household energy bills by up to £600.”
