The fiscal watchdog confirmed the UK is in recession and said the economy will shrink by 2%, while living standards will drop by 7% in the next two years
The OBR said that a large portion of £10bn of the Chancellor’s so-called spending “headroom” against his target to get debt falling by 2028 was made up of this rise.
But such a hike maybe poltically untenable. If Jeremy Hunt freezes fuel duty again, as every chancellor has done since 2011, it means he will only have a little over £4bn breathing space for extra spending or tax cuts if he wants to meet his target on debt. The downturn will leave half a million more people jobless as unemployment rises from 3.5 per cent to peak at 4.9 per cent in autumn 2024.Russia’s war in Ukraine causing energy prices to soarThis has in turn ratcheted up the financial pressure on governments that emerged from the pandemic with higher debt and “are again being called upon to help households and businesses through this latest crisis”.
But the watchdog also pointedly referred to the row over former prime minister, Liz Truss, and ex-chancellor, Kwasi Kwarteng’s full of huge unfunded tax cuts, which caused turmoil on markets, driving up the cost of borrowing for households, businesses and the state.
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