Cost of living crisis dropping biggest drop in living standards on record.

After accounting for growing costs, the government's forecaster predicted that family earnings would decline by 7% over the following several years. From 14.5% in September to 16.2% in October, food price inflation increased significantly. 

Declining living standards are a result of several things. A rise in the cost of food and energy has become noticeable. Due to the epidemic and the crisis in Ukraine, energy and food costs have skyrocketed, which is straining household finances. disproportionately affecting lower-income households, who spent roughly half of their income on food and energy compared to around a third of those with middle-class earnings.

The OBR - Office for Budget Responsibility - claims that because inflation is at a 41-year high, the economy is suffering. The government's energy price guarantee programme, which lowers bills, is primarily to blame for the forecaster's prediction that price increases will peak at 11% in the last three months of this year. 

However, Jeremy Hunt said that the tax increases and expenditure cuts he announced in his Autumn Statement, totalling £55 billion, will result in a "shallower downturn" and fewer job losses. Only a small portion of the impact caused by the former has been softened by the government support package. And then there are the tax increases that are aimed at the wealthy and will gradually deplete their wealth. The government's planned tax take will be the largest since World War Two.

Then there is the Bank of England's policy reaction to skyrocketing inflation: rises in interest rates, which are intended to lessen price pressures by tightening financial conditions. According to official predictions, when purchasers feel the pressure, home prices will drop by more than 5% in 2024. It anticipates that by raising the cost of borrowing money, consumers would spend less, reduce demand, and slow the rate of price increases. However, the cost of mortgages and other loans is rising as a result of increased rates. The UK economy is suffering from the spending restraint and is likely to go into recession at the end of the year.

By Zac Gold