Households will face increased energy bills, high inflation and tax hikes as the country is hit by recession.
Chancellor Jeremy Hunt told MPs he was having to make difficult decisions to ensure a “shallower downturn”, but the economy was still expected to shrink 1.4 per cent in 2023.
The Office for Budget Responsibility (OBR) forecast the UK’s inflation rate to be 9.1 per cent this year and 7.4 per cent next year, contributing to the squeeze on living standards.
The cap on average household energy bills will increase from £2,500 to £3,000 from April.
But Mr Hunt said “this still means an average of £500 support for every household”, while there would also be additional cost-of-living payments for people on means-tested benefits, pensioner households and those on disability benefit.
He also committed to increase the state pension and benefits in line with the 10.1 per cent inflation figure
Mr Hunt said the OBR concluded the UK “like other countries” is now in recession and was facing an increase in unemployment.
While growth in gross domestic product (GDP) was expected to be 4.2 per cent in 2022, in 2023 the economy was forecast to shrink by 1.4 per cent before growth of 1.3 per cent, 2.6 per cent, and 2.7 per cent in the following three years.
“The OBR says higher energy prices explain the majority of the downward revision in cumulative growth since March,” Mr Hunt said.
“They also expect a rise in unemployment from 3.6 per cent today to 4.9 per cent in 2024 before falling to 4.1 per cent.”
Mr Hunt told MPs he was taking “difficult decisions” to curb inflation.
“High inflation is the enemy of stability. It means higher mortgage rates, more expensive food and fuel bills, businesses failing and unemployment rising.
“It erodes savings, causes industrial unrest and cuts funding for public services. It hurts the poorest the most and eats away at the trust upon which a strong society is built.”
Reacting to the budget, Genevieve Morris, head of corporate tax at Blick Rothenberg, said: “It’s a Budget that boils the frog. The continued freezing of tax thresholds means most people won’t notice it directly as the temperature increases, and so won’t leap out of the water. They’ll simply discover years down the line that they boiled.
“Social rents capped, but no help for the poorest people living in private rented accommodation where the market is completely unregulated and increases in interest rates etc. will simply be passed on to tenants. Yet when they can’t afford to pay and lose the roof over their head there simply won’t be any social housing to accommodate them.”
Ahead of the statement, Liberal Democrat treasury spokesperson Sarah Olney labelled it a “cost of chaos budget”.
“Everyone’s being forced to pay the price for this Conservative government’s incompetence.”
Mirror reporter Mikey Smith speculated that the drawn-out nature of the announcements could mean Hunt is leaving Labour a “landmine” to step on if they win in 2024.
While others said there was only one word missing from the statement:
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