Middle-class families faces £500 hit to cost of living despite PM’s pledge

Middle-class families face a £500 hit to the cost of living despite Andy Burnham’s pledge to help them in the Budge t. Analysis by economists at the Adam Smith Institute (ASI) found that the average household will pay £206.50 extra on gas and electricity in 2027, and £36 on water. Higher inflation will mean their grocery bills will cost £112.19 more and their fuel an extra £140.64, adding up to £495.33. John Healey, the Chancellor, will use his Budget on Wednesday to offer struggling families help with cost of living pressures, including energy bills. But Silvia Andreoletti, head of communications at the ASI, said its analysis indicated that any help would only scratch the surface of the higher costs coming down the line. “No matter what’s in the Budget, it’s unlikely the Government will be able to save the middle classes from a cost of living squeeze in the coming year,” she said. “ High energy costs are driving up household bills and food prices, while inflation is making everything from rent to groceries more expensive. Oil markets point to cheaper petrol next year, but its effect will be dampened by the upcoming fuel duty hikes. “The Government needs to cut its spending and reduce costs for the average household rather than throw more money at short-term fixes that add to borrowing and keep inflation higher for longer .” Britons face pressure because of the turmoil in the Middle East caused by Donald Trump’s attack on Iran, and the continuing effect of Russia’s invasion of Ukraine. The ASI looked at the expected increase in various bills for an average household with one small petrol car. It assumes, for example, that the household contains two or three people and that they use around 9,500 kilowatt-hours of gas and 2,500 kilowatt-hours of electricity. It said that the monthly remortgage payments for the average family whose fixed two-year term expires in October 2027 will be £137 higher than now. Find £4.7bn for defence black hole Mr Healey will use his Budget to find an extra £4.7bn to fill a defence black hole that Sir Keir Starmer and Rachel Reeves left him. He is expected to raise some of the money by imposing higher taxes on banks, although he has rejected a proposal to equalise capital gains tax with income tax. He also wants government departments to find efficiencies so he can raise what he needs for defence from public sector cuts. But in an interview at the weekend, Angela Rayner, the Housing Secretary, was unable to point to anything that Mr Burnham has done since he became Prime Minister in July to cut the national debt . She told the BBC’s Laura Kuenssberg: “We’ve stuck to our fiscal rules, and you can see from the IMF that they’ve got confidence [about the Government’s plans for deficit reduction], and our economy is robust and resilient . “We’ve put investment into the economy so that we can start to grow it, and we’re seeing the signs of that.” She went on to discuss extra public spending on education and adult social care, and claimed: “We’re tackling the welfare bill.” Andrew Griffith, the shadow chancellor, said: “Faced with the highest tax burden in history and debt of galactic proportions, Angela Rayner couldn’t name a single pound of government spending Andy Burnham could cut. “Labour are perfectly happy to put up your taxes, but they can’t bring themselves to cut a penny of their own spending. It’s fiscal incontinence on a disastrous scale.”