Nightmare for Rachel Reeves as cost of living crisis returns

This is not the growth Rachel Reeves wanted.

The leaps in energy bills and council tax, combined with climbing inflation, mean the Chancellor’ faces accusations the crisis is back.

The bigger than expected 6.4% increase in energy bills will mean a typical household will pay £1,849 for their gas and electricity – an increase of £111.

This drain on incomes comes as families are already braced for increases in council tax. Nine out of 10 local authorities are hiking bills by at least 4.99% from April.

The Resolution Foundation – a highly influential think tank in Left-wing circles – has compared the modern council tax to Margaret Thatcher’s hated poll tax for the way is consumes poorer households’ budgets.

To make matters worse, retailers have warned they may have to push up prices to cope with April’s increase in employers’ National Insurance contributions.

An increase in food prices was a key driver behind the bigger than anticipated increase in inflation announced last week for the year to January.

Throw in rising water bills, and life is getting tougher for people who have not enjoyed bumper pay rises.

The situation is even more wretched for Ms Reeves because all this comes amid continuing anger at her decision to axe universal winter fuel payments for pensioners. Age UK described the increase in the energy price cap as “terrible news” and pushed for the Chancellor to reinstate the payments for people on a wider range of benefits than pension credit.

The disability charity Scope has also sounded the alarm, warning that “life costs a lot more if you’re disabled”.

Energy Secretary Ed Miliband has promised an expansion of the £150 warm homes discount but millions of households are going to feel squeezed from April.

Labour can expect Reform UK to step up its attack on its energy policies, with ’s party warning that even higher bills are on the way if the Government presses ahead with its net zero policies. The cost of energy is now an electoral battleground.

Ms Reeves also faces profound dilemma over the national finances. With the Office for Budget Responsibility widely expected to report next month she is in danger of breaking her fiscal rules, does she cut public spending or prepare the ground for more tax rises?

If people notice further declines in the quality of public services they will decide Labour is failing to deliver a better Britain. And if their own finances are hit they will listen to other parties who promise to ease their pain.

Many voters will have the chance to voice their anger in the May elections, with Labour in danger of a further hammering in next years Scottish and Welsh parliament elections.

Further increases in inflation will discourage the Bank of England from cutting , deepening the nightmare of families who have seen their costs rocket.

And the freeze in income tax thresholds means more people are paying the tax. This will trigger uproar as more pensioners face income tax demands.

Britain has faced a stagnation in living standards since the 2008 financial crisis and many people will greet the latest bad news with a weary shrug of the shoulders, resigned to living in a country where the economy fails to grow and life gets more expensive.

But with the Chancellor under pressure to find billions with which to boost the defence Budget – and the crises facing the NHS and social care too great for any government to ignore – this miserable state of affairs must change.

If more opinion polls show Reform UK is ahead of Labour, and if there are increasing signs the have won back trust on the economy, more MPs in Sir ‘s party may conclude a change is needed at the Treasury.