INFLATION could reach 18.6 per cent by January 2023, economists at Citigroup have warned. 

The forecast is far more pessimistic than the Bank of England’s prediction of 13% by the end of the year. 

It would be the highest level for nearly half a century. 

Citizens Advice Scotland warned that “more big increases” in prices and bills would ultimately “cost lives.”

In their report this morning, the US investment bank predicted that the retail energy price cap - currently set at £1,971 a year -  would be raised to £3,707 in October before reaching £4,567 in January and then £5,816 in April.

Benjamin Nabarro, chief UK economist at Citi said: “We now expect CPI inflation to peak at over 18 per cent in January.”

He said the forecasts had taken account of a 25% hike in wholesale gas prices last week and a 7% rise in wholesale electricity prices.“Even with the economy softening, last week’s data reaffirmed the continued risk of pass through from headline inflation into wage and domestic price setting could accelerate,” he said.

Citizens Advice Scotland Chief Executive Derek Mitchell called for the government to intervene.

He said: “This is simply unsustainable for people who are hanging on by their fingertips right now, more big increases in prices and bills will drive people into poverty, debt and destitution.

“This cost of living crisis is going to cost lives without urgent and radical intervention from government on the scale of the 2020 pandemic or the 2008 financial crisis.

"People will freeze or starve unless they get help.”

 

Bill Bullen, chief executive of Utilita, said the Tories should end their leadership contest early to allow the next Prime Minister to urgently tackle the cost of living crisis.

He told BBC Radio 4’s Today programme: “All through the summer, we’ve been hearing about customers in distress, customers who are worried that they’re not able to heat their homes over this coming winter.

“That’s why we’re saying to the Government, you’ve got to take this decision to freeze prices at their current level right now.

“This cannot wait until the 5th or 6th of September. The Conservative Party needs to sort themselves out, decide who the leader is going to be this week, so that the Ofgem announcement on the 26th doesn’t have to happen. That is such an imperative.

“Frankly, for the sake of the nation, I think the Conservative Party need to sort their leadership contest out quicker than they’re currently planning to do it. Then at least we will take away the stress of this winter coming up for tens of millions of households."

Liz Truss - who, according to the polls will almost certainly be the next Prime Minister - had said she will use an emergency budget in September to announce what her government will do to help rising energy bills.

It is expected it will contain some spending measures, though details are scant. 

Boris Johnson, unwilling to bind the hands of his successor, has repeatedly ruled out taking any major decision on spending before he leaves office early next month.

The SNP’s Work and Pensions spokesperson, Kirsty Blackman, said the lack of action taken by the government was only making the cost of living crisis worse.

“Right now, food insecurity and utility bills are skyrocketing – yet the Prime Minister and Chancellor continue to sit on their hands.

"There can be no more delays – it is time to act, and act with haste. 

“These constant delays now mean we need to see a pandemic-style level of support delivered.

"This must include introducing an emergency budget, freezing the energy price cap, scrapping VAT on fuel, doubling energy bill support to families, and offering business energy price caps and small business energy grants."