Wi or no emergency cost of living UK government looks vulnerable. A prime minister has lost his once-golden mark, a prime minister is questioned by the police about partying in lockdown. Boris Johnson’s party moves from one scandal to another.

Households are experiencing the biggest squeeze in living standards since modern records began in the 1950s, adding insult to injury, ahead of a local election campaign that will test the Conservative Party vote winning machine. For those of you already partying ahead of next month’s polls, is there any positive news to talk about?

This time last year, the political landscape was very different. Furlough has averted the worst of Covid’s economic devastation, while hope for an end to the pandemic is looming thanks to the rapid progress of the vaccine program. Johnson was on a high, promising “stab, stab, stab and work, work, jobs” as his party crushed Labor in the polls.

When voters go to the ballot box on May 5, they will feel less satisfied. Growth may have returned, but it won’t be the same for many. While the average household budget has been largely unaffected by the Covid recession, with many record savings during the lockdown thanks to government support, this year will be marked by a lack of help when income drops sharply. Despite overall economic growth, the typical family will face the heaviest financial losses as the record begins around the time post-war allotment ends.

Over the past four decades, real household disposable income has fallen just four times before: three times after the 2008 financial crisis and again after Brexit crashed the pound, knocking it out. Britain’s spending power.

On an official basis, the UK economy recovered to pre-Covid levels around the beginning of the year, after a brief but fortunate recession. However, the recession is still brewing for most people, with average real income now expected to take until 2024 to recover – that’s two years later.

Given these factors, it’s surprising that Rishi Sunak chose not to do more in her spring reporting small budget. The Prime Minister has liked to talk about “building a bridge” across an economic ravine opened by Covid. While he was successful on a large scale, the mission was clearly not complete.

According to New Economic Fund, more than 34% of the population – about 23.5 million people – will not be able to afford the cost of living this year. Using a measure known as the minimum income standard – based on polls of what people think is necessary to meet socially acceptable basic costs – it estimates nearly half of all children will fall into a lower state.

The impact will be more significant outside London and the southeast, with 44 per cent of all households in the northeast falling below the minimum income. Given that the squeeze would have a disproportionate impact on poorer regions, it’s all the more remarkable that Sunak omitted any new funding to level up in its spring statement.

After rejecting a subsidy increase in line with soaring inflation, the Joseph Rowntree Foundation said Britain would see a drop in the value of its base job loss benefit rate over the next 50 years. After a decade of cuts and freezes implemented under the Conservative Party’s austerity push, the benefit has lost value in eight of the past 10 years. Not only have the Tories failed to calm the current cost of living crisis, but they have also dismantled key support systems in previous years.

The big danger now is that such uncertainty could create the conditions for a worse recession ahead. Most forecasters expect the pressure on households to ease next year, however risks are mounting that makes what started as a temporary gripe could be long-term confinement. more.

Talk about a growing recession on both sides of the Atlantic. With household finances hit hard, consumer spending is expected to slow sharply, while the outlook for a sustained increase in business investment could be frozen due to uncertainty. certainly increasing. In the United States, economists have begun to warn that a recession shock Coming.

Official figures this week are expected to reveal a slowdown in the UK economy in February and another rise in inflation. Last month, the Office for Budget Responsibility said there was a one-fifth chance of GDP shrinking this year or next, amid uncertainty over Russia’s war in Ukraine, inflation, global commodity prices and Covid.

There is growing agreement that Sunak will need to do more. Steffan Ball, chief UK economist at Goldman Sachs and former chairman of Prime Minister Tory Phillip Hammond’s council of economic advisers, expects Sunak to be called to action.

First and foremost, profits need to be increased to cushion the impact of rising costs of living. In addition to doing so for fundamental reasons of fairness and to support broader activity in a slowing economy, Ball stressed the technical inconsistency can be resolved.

Since the 1980s, governments have typically increased the value of subsidies in April each year by the previous September’s inflation rate, with the aim of keeping them in line with the cost of living. This year, however, the 3.1% inflation rate of last fall now looks upbeat as the cost of living measure rises to 8%.

Coming this fall, inflation is forecast by the OBR to be 7.5% in September, meaning welfare gains will pick up sharply in the spring of 2023. However, when households are in need most now and with inflation forecast to drop sharply in the coming year, a case can be made to drag the rise forward.

Governments, at a minimum, must increase the value of benefits to show they are serious about helping those most in need. Failure to do so will only ensure that conditions for increasing poverty become entrenched, while political parties with a record of making the poorer do not tend to perform well in the polls.

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