Britain facing a lost decade of pay growth

LONDON, Nov. 18 (IANS) – British families face decades of lost wage growth as inflation erodes years of better living standards, a media report says.

Price hikes over the next two years will completely erase wage increases built up over the last eight years, reports the Daily Mail, a government budget watchdog.

A 7 percent drop in living standards would be the biggest since records began in the 1950s, hurting spending and triggering a recession that started in the third quarter of this year.

The recession will last more than a year, the Office of Accountability for Budgets (OBR) predicts, and will wipe out economic returns by 2%.

And when companies feel the strain, they will start shedding jobs. Unemployment is expected to rise from the current level of 3.6 percent to 4.9 percent in the third quarter of 2024 – leaving 505,000 people out of work, the Daily Mail reports.

The dire predictions come as Jeremy Hunt unveils a £55 billion plan to raise taxes and cut spending to get public finances back on a more sustainable footing.

Economist Thomas Pugh of accounting firm RSM said: “The OBR forecast paints a grim picture of the economic outlook for the next two years, with a year-long recession and a record decline in real household income.”

Paul Johnson, director of the Think Tanks Institute for Fiscal Studies, said: “The next two years look dismal in terms of living standards.”

It happened when the chancellor announced a series of hidden taxes to plug a gaping hole in the treasury. The UK tax burden is now expected to rise to its highest level since the Second World War.

Hunt acknowledges that “in the midst of unprecedented global challenges, families, retirees, businesses, teachers, caregivers and many others are worried about the future.”

But he said his efforts to increase the Treasury’s coffers would result in “a flatter decline” and were necessary to “give the world confidence in our ability to pay our debts.”

Households’ real disposable income – the amount they have to spend after taxes and accounting for inflation – will fall 4.3% in the 2022/23 fiscal year, OBR forecasts, the Daily Mail reports.

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