Tax hikes for millions
HOUSEHOLDS will face increased energy bills, high inflation and tax hikes as the country is hit by recession.
Chancellor Jeremy Hunt told MPs he was having to make difficult decisions to ensure a “shallower downturn”, but the economy was still expected to shrink 1.4% in 2023. The Office for Budget Responsibility (OBR) forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year, contributing to the squeeze on living standards.
The cap on average household energy bills will increase from £2,500 to £3,000 from April. But Mr Hunt said “this still means an average of £500 support for every household”, while there would also be additional cost-of-living payments for people on means-tested benefits, pensioner households and those on disability benefit.
He also committed to increase the state pension and benefits in line with September’s 10.1% inflation figure.
Mr Hunt said the OBR concluded the UK “like other countries” is now in recession and was facing an increase in unemployment.
While growth in gross domestic product (GDP) was expected to be 4.2% in 2022, in 2023 the economy was forecast to shrink by 1.4% before growth of 1.3%, 2.6%, and 2.7% in the following three years.
“The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March,” Mr Hunt said. “They also expect a rise in unemployment from 3.6% today to 4.9% in 2024 before falling to 4.1%.”
The OBR’s bleak analysis showed rising prices would erode real wages and reduce living standards by 7% in total over the two financial years to 2023-24, wiping out the previous eight years’ growth, despite over £100 billion of additional Government support.
Mr Hunt told MPs he was taking “difficult decisions” to curb inflation.
“High inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising.”
Mr Hunt was setting out a package of around £30 billion of spending cuts and £24 billion in tax rises over the next five years.
Blaming Vladimir Putin’s invasion of Ukraine for the “global energy crisis, a global inflation crisis and a global economic crisis” he said “we have risen to bigger challenges before”.
“We aren’t immune to these headwinds but with this plan for stability, growth and public services, we will face into the storm,” he said.
“There may be a recession made in Russia but there is a recovery made in Britain.”