Britain is heading for its biggest fall in living standards since the 1950s this year, despite a mini-Budget in which chancellor Rishi Sunak slashed £330 off national insurance for the average worker and took 5p off the tax on a litre of petrol. Inflation is forecast to peak at 9%.
The chancellor also promised a 1p cut in the basic rate of income tax in 2024, in what was immediately denounced as a pre-election bribe.
But he did nothing for the poorest, who see welfare benefits far outstripped by inflation which is expected to peak close to 9 per cent this year. And he rejected opposition calls for a windfall tax on the bumper profits of North Sea oil and gas companies to pay for a cut in VAT on energy prices.
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.
Inflation is forecast to peak at 9% later this year, its highest rate in four decades, the OBR said. The figure was calculated a week after the Russian invasion of Ukraine – meaning the estimate takes into account the large increases in global energy prices triggered by the conflict and retaliatory sanctions.
Oil and gas prices have fallen back on international markets in recent days amid hopes for a breakthrough in peace talks, although they remain at historically high levels.
In his update to the Commons, Sunak said he would “stand by” households by launching an immediate cut in fuel duty and raising the threshold at which workers begin to pay national insurance contributions.
