Outlook for the devolved nations, English regions, and UK households

Arnab Bhattacharjee, Adrian Pabst, Max Mosley and Tibor Szendrei

National Institute UK Economic Outlook, 2022, issue 6, 37-55

Abstract: Rising prices and higher taxes are squeezing household budgets: for 2022-23 we estimate that about 1.5 million households across the UK face food and energy bills greater than their disposable income, with the highest incidence in London and Scotland. The combined effect of inflation and the measures announced in the Spring Statement is to hit the poorest households hardest: we calculate that in 2022-23 the 11.3m households in the bottom half of the income distribution are set to lose around £4.2bn more than median households. The Chancellor should provide emergency support to cushion this income shock: we show that a Universal Credit uplift of £25 per week between May and October 2022 would cost around £1.35bn or £2.7bn for the whole year 2022-23; an additional £2.85bn should be given to the 11.3m lower-income households, amounting to a one-off cash payment worth £250 per household for 2022-23. Without this targeted support we expect a further increase in extreme poverty: in 2022-23, about 250,000 more households will slide into destitution, taking the total number to around 1 million, while approximately another 500,000 households face choices between eating and heating. Inequalities of income and wealth are growing between and within UK regions: our forecast shows that London has returned to pre-pandemic output levels, but many regions still lag far behind, especially the Midlands and Scotland. Employment and inactivity remain a persistent problem across the UK: although Scotland is the first devolved nation to return to pre-pandemic employment levels, all parts of the UK except London are experiencing growing labour inactivity, particularly among older workers.

Date: 2022
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