Threat of destitution for 250,000 UK households

The total number in extreme poverty as a result of the energy price shock would reach 1.2 million, NIESR said.

The number of households seeing soaring food and energy bills outstrip disposable income would be more than 1.5m.

They would be forced to rely on savings or extra borrowing, the think tank said, as it blamed welfare cuts since 2016 for worsening the situations of vulnerable families.

It recommended the government raise universal credit payments by £25 a week, as well as giving a £250 one-off cash handout to the 11.3m lowest-income households.

Further ire was directed at the government in relation to its committing limited funds to its skills budget and levelling up agenda in the March budget.

NIESR forecasts inflation to reach an average 7.8 percent this year, after peaking at 8.5 percent in the autumn – lower than the Bank of England’s (BoE) 10% estimate.

However, the government’s reliance on loans to support families will continue to elevate poverty levels, due to repayments over subsequent years.

Jagjit Chadha, director of NIESR, said: “It is quite clear that fiscal policy could be used to smooth the income shock.

“Time and again we have been told that there is little room for manoeuvre when the weather turns unpleasant,” he said, when the government “had a £20bn borrowing capacity under its own fiscal rules that could be used to support poorer families”.

Professor Adrian Pabst, NIESR’s deputy director for public policy, said: “Prices will push up bills, drag down demand and increase income inequalities. The big squeeze on budgets will hit the lower-income households hardest who live in some of the most economically and socially deprived parts of the country.

“To stop an additional 250,000 households from sliding into debt and destitution, the chancellor should instate a £25 per week universal credit uplift for at least 6 months.”