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Addressing MPs in the House of Commons, Jeremy Hunt promised that his autumn statement would lead to “lower inflation, lower mortgage rates, a shallower downturn and lower unemployment”.
Despite his efforts, inflation will continue to tear through household budgets.
In a fresh set of forecasts published on Thursday, the Office for Budget Responsibility (OBR) revealed that household disposable incomes are heading for their biggest fall on record.
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When adjusted for inflation, which is expected to peak at 11% this quarter, incomes will fall by 7.1% over the two years from 2021-22 to 2022-23, taking incomes back to where they were in 2013. It means a lost decade of income growth.
The figures underscore the depth of the inflationary challenge facing policymakers, who have already spent more than £100bn trying to keep energy bills down.
The government’s energy price guarantee, which caps a typical household’s annualised energy bill at £2,500 this winter and £3,000 next winter, has helped to protect disposable incomes but it doesn’t change the overall picture of dramatic decline. It will be 2028 before incomes recover to their 2021-22 level.
The government’s support packages have helped limit the fall in household incomes by around a quarter to 7.1% over the two-year period. The OBR said that real household disposable incomes per person would drop by 4.3% in 2022-23, which would be the largest since official records began in 1956-57.
That is followed by the second largest fall in 2023-24 at 2.8%.
It will be only the third time since 1956-57 that this measure has fallen for two consecutive fiscal years. The last time this happened was in the aftermath of the global financial crisis more than a decade ago.
The slump in household incomes will be exacerbated by the higher taxes announced by the chancellor.
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