In Britain, economic shock waves war in Ukraine exacerbate the pressure on household budgets and increase fear of the cost of living crisis. The British government on Wednesday announced some measures to help people cope with rising prices, which are at their highest level in three decades, including lower gas prices.
Treasury Chancellor Rishi Sunak has said sanctions against President Vladimir Putin’s government and efforts to isolate Russia are also hurting the British economy. It is most acutely felt in the cost of living, he said.
“The actions we have taken to impose sanctions on the Putin regime are not free for us at home,” Mr Sunak told lawmakers, announcing an update to the finance ministry’s tax and budget plans on Wednesday. Hours earlier, the Office for National Statistics said inflation had been at its highest level since 1992, with prices up 6.2 percent from a year earlier.
The intervention, announced Wednesday, was limited. For a year the government will reduce taxes on gasoline and diesel fuel by 5 pence per liter. (The rate has been frozen for more than a decade.) Local authorities will receive another £ 500 million to support low-income families. And the biggest announcement of the day was raising the income to the threshold that workers must reach before they can start paying national insurance, a broad tax that finances state pensions and some benefits.
“Reducing fuel tariffs, while very welcome, is just a drop in the ocean compared to the big tsunami of rising costs that is affecting businesses and households,” said Shevaun Haviland, director general of the British Chambers of Commerce. statement.
The Office of Budget Accountability, which provides independent economic and fiscal forecasts for the government, has worsened the forecast for the economy. On Wednesday, gross domestic product will increase by 3.8 percent, next – by 1.8 percent. Six months ago, the agency forecast growth of 6 percent this year and 2.1 percent in 2023. On average this year, inflation will be 7.4 percent and will not be below 2 percent of the central bank until 2024, the report said.
Household income prospects were even bleaker. Taking into account inflation, household disposable income in the next fiscal year, starting in April, will be reduced by 2.2 percent, according to the Office of Budget Responsibility. This would be the biggest drop in one fiscal year since official records began in 1956.
Despite the deteriorating economic outlook, Mr Sunak did not seem to want to stray too far from his previous spending and tax plans. It was the first fiscal announcement by the Treasury after the UK lifted restrictions on the pandemic, having already spent about £ 311 billion ($ 410 billion) in the first year of the pandemic on health services, businesses and workers. Mr. Sunak has repeatedly stated the need to repair public finances, temporarily raise some taxes and cut government spending.
The government has promoted a plan to raise national insurance for employers and workers from next month to ease the backlog in the National Health Service and fund adult social services.