Economy already in recession and set to shrink further next year: UK chancellor

As the rising cost of living eats away at people’s wages, the UK is experiencing its largest reduction in living standards ever. 

After accounting for growing costs, the government’s forecaster predicted that household incomes would decline by 7 per cent over the following few years. 

Additionally, it anticipates a spike in unemployment of more than 500,000 people. 

The chancellor just declared that the UK was already in a recession and was likely to get worse the next year.

However, Jeremy Hunt said that the tax increases and spending cuts he announced in his Autumn Statement, totalling £55 billion, will result in a “shallower downturn” and fewer job losses. 

The government’s energy price guarantee programme, which lowers bills, is largely to blame for the forecaster’s prediction that price increases will peak at 11 per cent in the last three months of this year. 

It nonetheless predicted that inflation would “erode real wages and reduce living standards” this year by the largest amount since records began in 1956. 

It anticipates that after accounting for inflation, household earnings will return to where they were in 2013. The recovery process will take another six years, but by 2028, they will still be “over 1 per cent below pre-pandemic levels.”

The Office for Budget Responsibility (OBR) claims that the UK is also experiencing problems with rising interest rates, which the Bank of England has increased to 3 per cent in an effort to combat inflation. 

Due to rising mortgage expenses, it is also anticipated that house values will decrease by around 9 per cent over the next two years.

(with inputs from agencies)

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