UK facing record fall in incomes

Hunt blow for living standards

LIVING standards are set to fall to their lowest level in decades as wages struggle to keep up with eye-watering levels of inflation and higher interest rates, the UK’S fiscal watchdog has warned.

According to the forecast from the Office for Budget Responsibility (OBR), real household disposable income per person will drop by 4.3 per cent in 2022-23 – the biggest fall since records began in 1956-57.

The OBR then expect it to plummet by 2.8% in 2023-24, the first consecutive annual fall since the 2008 financial crisis.

The drop will wipe out all of the income gains of the past eight years.

It could take another five years before it recovers, but even then will still be 1% below pre-pandemic levels.

The analysis came as Jeremy Hunt unveiled his Autumn Statement, setting out the tax and spending plans he hopes will tackle the £55 billion black hole in the economy.

He told MPS that the UK was “now in recession” and that his three priorities as Chancellor were “stability, growth and public services”.

While he will get growth this year – up by 4.2% – GDP will fall by 1.4% in 2023.

And, as the recession takes hold, unemployment is expected to rise by 505,000, up from 3.5% to 4.9% in the third quarter of 2024.

Though inflation will drop next year after peaking at 11.1%, it will only fall to 7.4% next year.

While the Chancellor used yesterday’s budget to extend Liz Truss’s Energy Price Guarantee for another 12 months, it will be significantly less generous, with most households facing a £500 increase in their bills.

Mr Hunt avoided some of the spending cuts and tax rises predicted, but with UK borrowing projected to hit £177bn, and government debt £400bn higher than expected, those decision have only been deferred.

The toughest choices will be for whoever is chancellor after the next General Election.

Unexpectedly, Mr Hunt also announced a raft of new spending promises on schools and health and social care services in England. The Chancellor told MPS this would mean a £1.5bn uplift to the Scottish Government through Barnett consequentials.

However, the SNP said inflation had already left their budget down £1.7bn on last year.

There was good news for pensioners, with the Chancellor protecting the triple lock, which ensures the state pension rises every year by whichever is the highest of inflation, earnings growth or 2.5%.

The 10.1% increase should mean an extra £870.

Benefits, too, will be uprated by the rate of inflation.

What was most striking about Mr Hunt’s Budget was the change in tone and policy from his immediate predecessor.

Just eight weeks ago, Kwasi Kwarteng promised £45bn of tax cuts. Yesterday, Mr Hunt effectively announced £25bn worth of tax rises.

The OBR estimates that the tax take, as a share of national income, will rise to its highest level since the end of the Second World War.

THE Chancellor has been branded “out of touch” after it emerged he has sought planning permission for a roof extension on his £1.7 million London house.

Jeremy Hunt announced plans for almost £25 billion in tax increases and more than £30bn in spending cuts by 2027-28 in his autumn statemen.

Mr Hunt submitted a planning application to Westminster City Council in September, seeking approval for an array of works on his four-storey house in Pimlico, which has now sparked a backlash.

Liberal Democrats Cabinet Office spokesperson Christine Jardine said: “On the day of this cost of chaos budget, the British public will judge the Chancellor on his policies, not his wealth or his home renovations.

“What everyone has seen today is eye-watering tax hikes and real-terms cuts to our public services while the country falls into a bleak winter recession.

“This is an out-of-touch Chancellor forcing everyone to pay the price for the Conservative Government’s incompetence.”

The planning application is for an “erection of a mansard roof extension, with associated internal works” as well as “minor alterations to the front vaults and alterations to fenestration at the lower ground floor, amendments to the front railings at ground floor level”.

The status of Mr Hunt’s application is said to be “pending”.