Rishi Sunak failures will trigger recession, economists warn Business

Rishi Sunak is pushing Britain into recession due to its failure to tackle the cost of living crisis, top economists have warned.

The economy will contract in the second half of the year, according to the National Institute for Economic and Social Research (Niesr), in part due to the Chancellor’s reluctance to support consumer spending with tax cuts or support for households .

Niesr predicts inflation will soar above 8% and unemployment will rise to over 5% as the country is hammered amid an international slowdown.

Its forecasters also expect Russia’s war in Ukraine to dampen global growth, costing the global economy $1.5 trillion in production.

UK GDP will fall 0.2% in the three months to September and a further 0.4% in the final quarter of 2022 as ‘stagflation’ threatens, before returning to years of lackluster growth.

Mr Sunak had the option to spend more or withhold tax hikes in his spring return, Niesr said, which would have helped “reduce the likelihood” of the economy reversing.

Stephen Millard, an economist at the think tank, said: ‘The Chancellor has had a chance to help poorer households, to do something about it.

“But he chose not to. He chose instead to pay for the Covid aid, the additional tax support, by reducing the deficit.

Living standards are set to plummet, with real household disposable income expected to fall by 2.4% this year. Another 250,000 households will fall into destitution, bringing the total to around 1 million.

Mr Sunak’s own fiscal rules left around £10bn of headroom at the time of the spring statement beyond the measures he chose to take, such as cutting fuel duty by 5p, Niesr said.

Mr Millard – who worked at the Bank of England – said Threadneedle Street had kept interest rates too low for too long, contributing to soaring inflation this year.

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This notice was published: 2022-05-11 08:25:08

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