UK recession will miss eight years of living standards gains, budget watchdog says – National

The UK economy will contract by 2% in the recession that started last quarter, the UK budget watchdog warned in a report issued Thursday.

The Office of Budget Responsibility (OBR) forecast Thursday that the recession will last for about a year and that the UK economy won’t reach pre-pandemic levels until the final quarter of 2024.

“Despite more than £100bn of additional government support, rising prices will erode real wages and reduce living standards by a total of 7% over the two fiscal years 2023-24 (the last eight years of growth ),” the agency report said. warned.

“Pressing real incomes, rising interest rates and falling house prices will all weigh on consumption and investment, sending the economy into a year-plus recession starting in the third quarter of 2022, plunging from peak to trough. 2%.”

Britain’s Conservative government on Friday pushed millions of a “stressed middle class” as it tried to revive an economy hit by double-digit inflation and the reckless tax cuts of recently ousted Prime Minister Liz. Defended the decision to raise taxes on workers truss.

Treasury Secretary Jeremy Hunt’s emergency budget announced on Thursday includes a £25 billion ($30 billion) tax increase, including higher income taxes for middle and upper income earners and a sharp rise in local household taxes. I’m here.

In announcing the plans, Hunt said OPR had determined that “the UK is currently in recession like the rest of the world”.

The Treasury Department has acknowledged that the move will bring taxes as a share of national income to the highest level since World War II.

Mainly due to high inflation, projected to reach 9.1% in 2022, and soaring energy costs following Russia’s invasion of Ukraine, the stagnation in salaries will put the government’s financial watchdog at risk for life in the UK over the next two years. This means that the level will drop by 7%. Said.

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“The truth is we’re getting poorer,” said Paul Johnson, director of the Institute for Fiscal Studies, a think tank.

“Heavy borrowing, hefty debt, hefty taxes and public spending are straining,” he said, adding: “We are on a long, difficult and unpleasant road.”

Mr Hunt has reversed a multibillion-pound underfunded tax cut announced less than two months ago by his predecessor Kwasi Kwarten. The package rocked financial markets, sending the pound plummeting against the US dollar to record lows and forcing emergency intervention from the Bank of England. .

Hunt also abandoned a central doctrine promoted by Kwartengg and Truss: that tax cuts were the key to economic growth.

“Sound money is more important than low taxes,” he said. “None of it is easy, but it’s the right thing to do.”

The emergency budget delayed significant cuts in public spending until 2025 after the next national elections, promising to put more money into critical areas like education and health. Hunt also included assistance for the most vulnerable in British society, raising pensions and welfare benefits to match inflation and raising the minimum wage by 9.7%.

But millions of people in the UK face higher energy bills in the spring. The government plans to cut aid that limits the average household’s utility bills to £2,500 ($3,000) a year. That’s more than double what he was a year ago. .

Billing is expected to increase to an average of £3,000 ($3,575) per year.

Consumer affairs expert Martin Lewis said the worst was yet to come for many.

“There will be a perfect storm next spring as electricity prices rise, the cost of living continues to rise and utility bills peak,” Lewis told radio station LBC. “My concern is what people will do to overcome that difficulty.”

Using files from Associated Press and Global News.