UK living standards affected by the rising inflation levels
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Living standards in the United Kingdom will take a hit amid the rising inflation levels. The situation will worsen following the proposals made by the finance minister, Jeremy Hunt, including a tax hike and cuts on spending.
UK living standards take a hit amid rising inflation
The UK government is trying to restore the country’s strong economic status. The measures are being taken to combat the crisis caused by former UK Prime Minister Liz Truss after proposing tax cuts.
On Thursday, the UK finance minister announced a budget program that will save 55 billion pounds annually to solve the financial situation. Nearly half of the changes will involve tax increases. This has stirred protests within the ruling Conservative Party.
Britain is struggling to adjust post-Brexit. The country is facing record-high inflation levels amid a slowing global economy. It is the only out of the seven largest economies yet to recover to the size it was before COVID.
According to the Office for Budget Responsibility, disposable household incomes would drop 4.3% during the current fiscal year. They would also drop 2.8% in the 2023/24 financial year. This would be the sharpest drop in records since the 1950s. The two-year decline would erase the growth in the living standards for the eight years leading to 2022.
Tax increases to cause more pain to UK households
The tax increases that are expected to take effect will deal a heavy blow to UK households. Millions of UK residents are already dealing with the increased cost of living. The inflation level in October was at a 41-year high of 11.1%.
The UK finance minister has said that the tightening policies were needed to ensure that Britain can return to a calm financial market. However, the majority of belt-tightening measures have been delayed past 2024, which is the year when a national election will take place.
While speaking to parliament, Hunt said that credibility should not be taken for granted, arguing that the recently released inflation data proved that the government needed to continue the fight to lower inflation by using measures such as rebuilding the public finances.
Hunt has also added that the economy was already in a recession and would shrink in 2023 as inflation remains high. Inflation is expected to average 9.1% before dropping to 7.4% in 2023.
