Thursday, December 1, 2022

Britons face an unprecedented drop in their standard of living

Households in the United Kingdom will suffer a record drop in disposable income in the coming years, according to estimates by the Office for Budgetary Responsibility (OBR), which warns that the crisis will erase the last eight years of growth in household wealth , which in 2028 will remain below pre-pandemic levels.

The Office, which expects UK GDP to contract by 1.4% next year, while inflation has hit 41-year record levels, estimates UK citizens’ real disposable income will fall by 4.3% in the next year. fiscal year 2022-23, which would be the largest decline since records began in fiscal 1956-57.

This record contraction of household disposable income in the current year would be followed by the second largest drop in the entire historical series in the 2023-24 period, with a decline of 2.8%.

“This would be only the third time since 1956-57 that the data per person decreases for two consecutive fiscal years,” says the OBR, which recalls that the last time this happened was after the global financial crisis.

In this way, the estimated cumulative drop of 7.1% between fiscal years 2021-22 to 2023-24 is large enough to return disposable income per person “to its lowest level since 2013-14.”

In this sense, the Office calculates that the disposable wealth of the British for the 2027-28 financial year would recover the level of the year 2021-22, noting that in such a case it would remain more than 1% below the levels prior to the COVID pandemic. -19.

Despite the estimated loss in standard of living, the OBR points out that the contraction in disposable income per person would have been even greater without the announced fiscal support measures, particularly the limitation of energy prices and other support measures to deal with the increase in the cost of living, which raise the level of disposable income per person by 4.5% in 2022-23 and by 2.5% in 2023-24, relative to what would have happened otherwise.

This Thursday, the British Finance Minister, Jeremy Hunt, announced a tax consolidation plan of 55,000 million pounds (62,955 million euros), with tax increases with an estimated scope of 25,000 million pounds (28,616 million euros) and an adjustment in spending of about 30,000 million pounds (34,339 million euros).

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