Living standards in Britain are expected to fall at the fastest annual rate since the mid-1950s and will take until at least 2024 to return to pre-Covid levels, a government’s independent economic forecaster has said.
Despite the measures announced by Chancellor Rishi Sunak at his spring statement, the Office for Budget Responsibility (OBR) said real household disposable incomes per person would fall by 2.2 percent in 2022-23 as earnings from work fail to keep pace with soaring inflation.
OBR also mentioned that the fall would be the biggest in a single financial year since modern records began in 1956-57, and that it would take until 2024-25 for inflation-adjusted living standards to return to their pre-pandemic level.
Highlighting an unprecedented squeeze on households as inflation soared after the Covid pandemic the OBR said the fall in income will lead to lower levels of consumer spending in the UK economy.
Inflation is forecast to peak at 9 percent later this year, its highest rate in four decades, the OBR said.
The watchdog also warned the inflation risk from Ukraine meant there was a high degree of uncertainty about its forecasts.
The OBR’s warning comes alongside economic think tank Resolution Foundation’s that around 1.3 million Britons will be pushed into absolute poverty by the cost of living squeeze.
Just one in eight workers would have their tax bills fall by the end of this parliament in May 2024, when the rate of income tax would drop by 1p to 19p, the think tank said.
“In the face of a cost of living crisis that looks set to make this parliament the worst on record for household incomes, the chancellor came to the box yesterday promising support with the cost of living today, and tax cuts tomorrow,” said Torsten Bell, the think tank’s chief executive.
“The decision not to target support at those hardest hit by rising prices will leave low- and-middle income households painfully exposed.”
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