Image source, AFP

Think tank the Institute for Fiscal Studies said the support package announced today by the government "will not stop average incomes and living standards from falling over the coming year."

It reckons an average earner on £30,000 a year will still be around £400 worse off in the next fiscal year than this.

Meanwhile an out-of-work lone parent is likely to be more than £300 worse off.

"The one group who should see their living standards rise are the lowest-paid workers who will benefit from a rise in the national living wage and the increase in the generosity of Universal Credit which came in in November," said IFS director, Paul Johnson.

Image source, Sophie Howe

Sophie’s on maternity leave. She says she can only afford to heat one room in the house at any one time and wears a dressing gown indoors when it’s cold.

The 28-year-old, from Nottingham, told Radio 1 Newsbeat: “We only have the fire on in the day if possible and keep in that living room, or most of the time we even go out, just to avoid having the heating on or the fire on.

“My bills are restricting me to one room with my daughter.”

She’s fearful of the rises and says she and partner Christian are now recalculating what they can and can’t afford.

“No matter what we’ve got to make sure the money’s there to heat the home for our daughter. It’s quite upsetting and I’m really scared going forward.”

Eleanor Lawrie
Social Affairs reporter

Betty is one of thousands of pensioners who are anxious about the impact of rising energy and food bills.

“There’s no money going in the bank apart from my pension. And money can’t last forever so I’ve got to be careful,” she says.

“I can see the difference in the shops when my carer brings me back my shopping. The prices have gone up.”

Betty attends a centre run by Glasgow’s Golden Generation, where she can have a hot meal and play bingo with her friends.

“A lot of our older adults are telling us they are struggling, they are worrying. It’s a case of people sitting in cold houses and not being able to turn their heating on,” says Lynsey Neilson, who works for the charity.

“It’s making that choice between heating their home and eating. We have people asking us if they can take extra food home for dinner because they are not going to have anything to eat."

The BBC has been talking to people up and down the country today about how they feel about rising energy prices.

Amanda from Preston is a single mother who has to use food banks to make sure she can pay her gas and electricity bills.

She says the rising cost of energy leaves her dealing with "so much stress" and that, after bills, she had about £10 each month.

She says she survives by often paying late and bringing "duvets downstairs with hot water bottles" to keep her and her daughter warm.

"Sometimes I have to miss one bill and pay it a week or two after... that is how I survive."

Kevin Peachey
Personal finance correspondent

Timing is everything. Unpacking when bills rise and support is provided may require a good spreadsheet.

Here are the key dates.

At the start of April, energy bills will go up, typically by about £700 a year.

At the same time tax rises will kick in - notably national insurance - but there will be some help through a council tax discount.

In October, when another potentially higher energy price cap is scheduled to take effect before winter, the rebate scheme on bills will come in.

Image source, PA Media

Bank of England governor Andrew Bailey says the government's action to tackle rising energy bills would help take some of the pressure off struggling households.

He was speaking at a news conference following the BoE's decision to raise interest rates from 0.5% from 0.25%.

Bailey stressed the interest rate move was also part of an attempt to curb a rapid rise in the cost of living, explaining it was "necessary because it is unlikely that inflation will return to target without it".

In response to accusations that the rate rise has come at the worst time for households, he said: "If we don't take this action, it would be even worse. I know it's a hard message."

Image source, PA

The UK government's plans for a council tax rebate to help households with soaring energy bills does not apply in Scotland, Wales or Northern Ireland.

But the chancellor is giving devolved governments a share of about £565m of funding as part of his announcement.

Scotland's First Minister Nicola Sturgeon is pledging that "every single penny" of money it receives will be used to support people with the rising cost of living.

Asked about the announcement during First Minister's Questions, Sturgeon says the plans "sounded like welcome steps to help mitigate" the price cap rise, but did not go far enough.

Sturgeon went on to highlight her administration's £41m support fund to help people who are struggling to pay fuel bills.

Image source, Ofgem

Ofgem has suggested that the energy price cap could be adjusted more frequently to ease the pressure on energy suppliers and consumers.

The regulator’s chief executive, Jonathan Brearley, tells the BBC they are still considering it as part of a consultation on changes to the cap.

Brearley says the change would mean "when prices go up it adjusts, but it will equally quickly adjust when prices come back down again”.

The cap is due to be reviewed again in August this year, with the rise taking effect from October.

Image source, Reuters

The prime minister has been in Blackpool today where he was asked by reporters about the rising cost of living.

Boris Johnson says the "mega package" of economic support announced by Chancellor Rishi Sunak will help people with rising energy bills.

"That is there to help people with this particular spike that we are seeing right now," he says.

"What I hope and believe is that eventually, as the world economy gets its momentum back, the inflationary pressures will start to subside."

Despite the current pressure on people's finances, Johnson insists the planned rise in National Insurance in April has to go ahead to address the "colossal" NHS backlog from the pandemic.

"It's the number one priority of the British people and we've got to fund it," he says, adding the tax rise is "not what anybody wants to do... but we have got to do it."

Image source, PA Media

We've heard a lot about the cost of living crunch and how the government intends to respond to it today.

Here's a recap of some of the key details to bring you up to speed:

• The price cap for people's gas and electricity bills is rising by a record £693, or 54%, in England, Scotland and Wales from April, with regulator Ofgem blaming extraordinary pressures in the energy market
• Energy companies say the increase will cause even the average family to struggle with bills

• Chancellor Rishi Sunak announced two measures to reduce the pressure on households: A £200 discount on all energy bills from October that will have to be repaid later, and a £150 council tax rebate for those in bands A to D in April
• Labour criticised Sunak for not scrapping VAT on energy bills to help people with rising costs
• Meanwhile, the Bank of England raised interest rates for the second time in three months to 0.5%, and warned that price rises could speed up. Find out how the interest rate hike might affect you here
• However, the Bank predicted inflation would fall back to 2% over the course of 2023

And there's more here on the cost of living from the Bank of England.

In its latest Monetary Policy Report, the Bank predicts that post-tax incomes will effectively fall 2% this year, when you take into account the rising cost of living.

That would represent the biggest fall in take-home pay since records began in 1990.

Image source, Getty Images

UK inflation is at its highest rate for 30 years, having increased to 5.4% in the 12 months to December.

And rising domestic fuel prices could push that up even higher, as the energy regulator announces average prices will go up £693 a year in April.

So how exactly how will it affect people living in the UK?

You may not notice price rises from month to month - but right now, they are rising so quickly that average pay is not keeping up.

This means the money people earn does not go as far - with more seeing a noticeable drop in their "real" wages.

Find out more here.

The Bank of England's gamblepublished at 13:58 Greenwich Mean Time 3 February 2022

13:58 GMT 3 February 2022

Dharshini David
Economics Correspondent

The split in the Bank of England’s interest rate panel - with five voting for a 0.25% rise and four for an even larger one - underlines the dilemma it faces.

Should it act decisively in a bid to curb the fastest rise in the cost of living for 30 years or take a softer approach to spare households who are bracing for the biggest squeeze in living standards in 30 years?

In hiking the cost of borrowing at all, the Bank has opted to prioritise inflation, in the hope the latter situation may ease as the months progress. But it is a gamble.

And while more than a million households will now inevitably face higher repayments on their variable rate or tracker mortgage, millions of savers may not see their providers increase their returns in the same way.

Szu Ping Chan
Business Reporter, BBC News

Image source, Getty Images

Returning to interest rate news, the Bank of England's governor has been hosting a news conference after the Bank announced earlier that rates were rising to 0.5%.

Andrew Bailey says the impact of the Omicron variant on the economy is expected to be of "limited and of short duration".

He says the bigger factor restricting growth is the sharp rise in energy prices and global goods shortages.

While the Bank predicts inflation will peak at more than 7% in the spring, Bailey says it is expected to fall back towards its 2% target over the course of 2023.

But he warns that if workers keep asking for pay rises to match price increases, inflation could prove to be "more persistent".

We've heard plenty about the rises in household energy bills, but what does your money pay for?

Here's a breakdown from a bill a typical customer would expect to pay this summer...

In Scotland about 25% of households are in fuel poverty, the highest rate in the UK.

Gary Shields lives near Fife, in the shadow of Longannet power station. He’s so close that three of his garage windows smashed when it was demolished last year.

Gary was once employed at the station but a cancer diagnosis means he can no longer work.

He gets his energy off grid, and is now relying on charity the Fuel Bank Foundation to pay for his gas.

But he’s worried about how to cover future price increases when that runs out, and might have to move to a smaller house to make ends meet.

He says: "I’m really quite worried about it because we don’t have enough money.

"They are talking about a 50% increase on the bills and we don’t have the ability to meet those needs. We’ll be basically on our own.”

Zahada Safdar’s bills went up when her children moved back home from university in the pandemic.

She lives in Glasgow, where about one in four people are in fuel poverty, meaning they spend more than 10% of their income on energy.

Things have got so bad that she only puts the heating on for half an hour every couple of days.

Zahada's severe arthritis means she has extra need of warmth, and carries a hot water bottle everywhere she goes, while her children study at the library to keep warm.

The central heating will have to go entirely when prices increase, she says.

“The impact on me is going to be horrendous, I’m not going to be able to switch it on at all.

“Friends and family are struggling, they say everything they are bringing in is going on utility bills. They are barely able to feed their kids, or feed themselves properly.

“I’m the same, I can’t remember the last time I had three meals a day.”

Image source, Getty Images

As we've been reporting, electricity and gas bills for a typical household in England, Wales and Scotland will increase by 54% - £693 a year - in April when the energy price cap increases.

And prices are expected to rise again in October, when the cap is next reviewed.

The government says financial help will be available to help offset some of the price rise.

But what exactly is the energy price cap - and what specific measures has Chancellor Rishi Sunak announced to help people with their bills?

Find more on how it all works and what it could mean for you here.

Image source, PA Media

There's been a lot going on, but one of the most important things today is that energy bills are going to go up for many of us.

Energy bills won't rise immediately for customers who are currently on fixed rate deals, but they are likely to see an increase at the end of the term.

Fixed deals currently available to new customers are already significantly more expensive than previous deals.

So should people try and fix a deal with a provider or stick with the new price cap?

Martin Lewis, the money saving expert, has tweeted: "To everyone asking should I stick on the price cap or fix now? My instinctive response is stick on it."

BUT, he says his team will be crunching the numbers through the day and to give them time.

We'll give you an update later on if he updates his advice.

Reality Check

Image source, Getty Images

Chancellor Rishi Sunak says he rejected calls to cut the 5% VAT rate on domestic fuel, partly because it would disproportionately help wealthier households.

The reason it would help wealthier households most is that a 5% cut in fuel bills would mean more money off for households with bigger homes that use more fuel.

The chancellor’s announcements today did include some differences for different households - the council tax discount will only be for people with properties in bands A to D, for example, which excludes those with the biggest homes.

But using council tax may also exclude the poorest households, which get full council tax reduction and so do not pay the tax.

The government is providing extra funding to local authorities to help people who do not pay council tax and also to support people on low incomes who live in bigger properties.

You can read more about the arguments on VAT and what was promised here.