Britons face the largest fall in living standards on record as the latest iteration of the Tory government slashes spending and raises taxes in an effort to win back the confidence of financial markets.
UK Chancellor Jeremy Hunt on Thursday announced the freezing of income tax allowances and lowered the threshold at which people start to pay the highest rate of income tax, in order to close a £55 billion hole in the public finances. He also announced around £30 billion in spending cuts and another £25 billion in tax hikes.
Hunt said the measures would reassure markets that the government and the Bank of England are now working in “lockstep”.
But contrary to suggestions floated when Liz Truss was prime minister, Hunt announced a 10% increase in the state pension, benefits and tax credits — in line with September’s inflation figure — and an increase in the national living wage to £10.42 an hour for those aged 23 and above. An increase below inflation had previously been mooted in order to save money.
Hunt also — memo Jim Chalmers — confirmed a substantial increase to windfall taxes on the profits of oil and gas companies and additional investment in schools and the National Health Service.
The bleaker news was from the independent Office for Budget Responsibility (OBR). It estimates that the UK economy is in recession now and that GDP will contract by 1.4% in 2023, while inflation is predicted to average 9.1% this year and 7.4% next year.
And the OBR had grimmer news about what could happen to UK living standards. It says the country will suffer the largest fall in living standards since records began, with real household disposable income (RHDI), a measure of living standards, projected to fall by 4.3% in 2022-23, the largest single-year decline since the Office for National Statistics began recording in 1956-57. This will be followed by the second-largest fall of 2.8% the following year, and the cumulative decline of 7.1% from 2021-22 to 2023-24 takes RHDI to its lowest point since 2014.
“Rising prices 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,” the OBR said.
By 2027-28, RHDI is set to recover to its 2021-22 level, but will remain more than 1% below its pre-pandemic level.
It means Britons will be paying for a decade of Tory incompetence, ideological obsession, Toby Jug nationalism and internecine warfare for a long time to come. The OBR didn’t spare the feelings of Brexiteers in its assessment:
Near-term growth in exports and imports is lower than in our March forecast as slowing global GDP growth hits exports and a weaker outlook for consumption and investment weighs on imports. Our trade forecast reflects our assumption that Brexit will result in the UK’s trade intensity being 15% lower in the long run than if the UK had remained in the EU. The latest evidence suggests that Brexit has had a significant adverse impact on UK trade, via reducing both overall trade volumes and the number of trading relationships between UK and EU firms.
“People have had enough of experts,” Tory Brexit supporter Michael Gove famously said during the Leave debate. Turns out the experts were right. Brexit and years of rank ineptitude have helped reduce the UK economy to the butt of jokes for those not forced to live in it, and to a country of real and major decline in living standards. The economy that Thatcher’s neoliberal shock treatment created, and the fairer version that Tony Blair presided over, has been run into the ground, requiring a painful rebuilding process that will take years of difficult decisions — not just by politicians but by Britons themselves.
Crosby, Textor etc – what do they think of their work. How much responsibility do they take for this outcome?
Good previous response about Crosby Textor. Perhaps other analytical forms have a role to play as well. Cambridge Analytics perhaps? Love the fact that the British economy as the butt of all jokes for those not forced to live in it and the Toby Jug reference to Boris. I say tough luck. It is not only their politics, which is toxic at the best of times as reflected in and by their media over many years. It is also their parliamentary system. This is what happens when you have unitary government over 4 completely varying regions, all would be countries, defined only by their proximity to London and the density of their populations. They are not far enough away from London to “do their own thing” and they are too close together. The UK is highly urbanised and they will find it eternally difficult to maintain quality of life and clean environment as long as you have 60+ million people jampacked into an area the size of the Sydney Basin.
“This is what happens when you have unitary government over 4 completely varying regions, all would be countries,”
A major problem IMHO is that the UK has these four regions but is neither a proper unitary government nor a federation.
That is correct. It is not a proper unitary country but it is the United Kingdom of England, Scotland, Wales and Northern Ireland. It is really Great Britan plus NI. It is a unitary country as defined as it’s capital is London which is also the capital of England. There was always a problem with 4 countries under its kingdom banner. Wales has its own parliament. Scotland has its own parliament. NI does – the Stormont which has only relatively recently sat after an absence of decades. There is no parliament exclusively for just England. It is unitary in name. They would have to create a stand-alone territory around one of their god-awful towns, call it something and govern from there. Goodbye Houses of Parliament and Goodbye Westminster and Whitehall. This would be a federation like us with the ACT encompassing Canberra as our capital so we could all agree on a united bunch of colonies and nationhood. Same with the US. That is why they created District of Columbia as its capital. The UK can’t be a federation by virtue of its Act of Settlement and countless other acts of parliament and its royal family. Germany is a federation because of its many states. It used to have 400. Napoleon whittled it down to 39. and Bismarck whittled it down again to 3 and then one German Confederation. With the UK if one falls, so does the rest. It is a classic House of Cards and I can’t wait. Their Civil War wasn’t really about parliament – a commonwealth versus a monarchy as such. Cromwell behaved like a dictator anyway. It was really about religion and the place and appearance of the Church of England.
Federations are for more smaller states that comprise it. Like us, the US and Germany. The UK is just that. A united kingdom of originally 4 countries. Now 3 and a half. It should just be 3 but the Irish couldn’t just defeat those bastards in the early 1920s and they got partition. Like the Indians did 30 years later.
“Britons face the largest fall in living standards on record” !!! – so bring back those balmy, halcyon days of the Blitz, i guess
From the article:
“the country will suffer the largest fall in living standards since records began, with real household disposable income (RHDI), a measure of living standards, projected to fall by 4.3% in 2022-23, the largest single-year decline since the Office for National Statistics began recording in 1956-57.”
The Blitz was before 1956.
The one square mile of the City Of London was the goose that laid all the golden eggs. Brexit plucked it, now it is only waiting for the rising ocean to wash it away. But 60 million people will find a way through without that cess pit there to fleece them.
They will all fit in a circle with a diameter of 4km. Standing up. And they will do so if they are told it is a queue.
Just saying – it’s not all that crowded.
Two things need to go quickly: 1) The House of Horrors/Bludgers( Lords). 2) Private schools where the Tories crawl their way out to Westminster.
Excellent comments BK