UK living standards ‘to fall at fastest rate since mid-1950s’
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, according to the government’s independent economic forecaster.
Despite the measures announced by Rishi Sunak at his spring statement, the Office for Budget Responsibility (OBR) said real household disposable incomes per person would fall by 2.2% in 2022-23 as earnings from work fail to keep pace with soaring inflation.
It said 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, made worse by the further rise in global energy prices after Russia’s invasion of Ukraine, the OBR said the damage for families would mean lower levels of consumer spending in the UK economy.
With households expected to have less disposable income as prices increase, the Treasury’s tax and spending watchdog issued a sharp downgrade for its GDP growth forecasts this year to 3.8%, down from a previous estimate for growth of 6% when it last published predictions in October.
The OBR said the government’s preferred measure of inflation was now forecast to peak at close to 9% this year.
It added that its forecasts were completed a week into the Russian invasion of Ukraine, enabling large movements in global energy prices to be taken into account in its estimates. Oil and gas prices have fallen in recent weeks, although remain significantly above historical levels and prone to volatility.
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