LONDON, October 13 — As the UK government prepares its autumn Budget, inflation remains a central concern for policymakers and households alike. The Consumer Prices Index stood at 6.7% in the year to September 2023, down from a peak of 11.1% in October 2022 but still well above the Bank of England’s 2% target. This persistent pressure on prices continues to shape the fiscal debate ahead of the 22 November announcement.
Food and non-alcoholic beverage inflation reached 12.2% over the same period, adding strain to household budgets. The Resolution Foundation estimates that the poorest fifth of households now spend around 17% of their income on energy and food combined, up from 10% in 2021.
These figures highlight a growing disparity in living costs across income groups, even as average weekly earnings growth hit 8.5% in the three months to August 2023 — outpacing inflation for the first time in nearly two years. Despite this wage growth, real wages remain below pre-pandemic levels for many workers. The Institute for Fiscal Studies warns that without targeted support, living standards for low-income households could deteriorate further.
It estimates that the poorest 20% of households would see their incomes fall by 4.3% in real terms between 2021-22 and 2024-25 under current policies, a projection that underscores the limits of broad economic gains. In response, the government has extended the Energy Price Guarantee at its current level until April 2024, a measure costing an estimated £12 billion.
It also announced a one-off £900 Cost of Living Payment for over 8 million means-tested benefit recipients, to be delivered in three instalments of £300 each. Labour has criticised this support as insufficient, advocating instead for a windfall tax on energy producers to fund expanded relief, while the Conservatives maintain that fiscal responsibility demands restraint on borrowing. The Office for Budget Responsibility forecasts public sector net borrowing at £120 billion for 2023-24, equivalent to 4.5% of GDP, declining to £85 billion — or 3.1% of GDP — by 2027-28.
These projections frame the tight fiscal space within which the Chancellor must operate, balancing immediate relief with long-term sustainability. The autumn Budget, set for 22 November 2023, is expected to detail spending and tax plans for the next five years, including potential adjustments to income tax thresholds and national insurance contributions. Looking ahead, the success of the Budget will depend on whether it can deliver measurable relief to vulnerable households without undermining the OBR’s borrowing trajectory.
Analysts will watch closely for any shifts in energy support, welfare provisions, or tax policy that could alter the IFS’s grim outlook for the poorest fifth. With inflation still elevated and growth uneven, the mechanics of fiscal choice will be under intense scrutiny.
