Reported by The Guardian
OBR cautions about Middle East war dragging down growth and triggering a fresh cost of living crisis
Healey offers £100 payment to households to help navigate ‘global economic storms’
British households face a “grim picture” for living standards as the war in the Middle East drags down growth and triggers a fresh cost of living crisis, the government’s independent forecaster has said.
More from the original report
As John Healey announced his first budget, the Office for Budget Responsibility (OBR) issued its report showing a sharp downgrade for growth in 2027, household disposable incomes and the public finances, despite the measures taken by the chancellor .
Although Healey sought to cushion the blow through “breathing space” policies to help with soaring energy costs, the watchdog said household disposable incomes after taking account of inflation would fall by 0.6% next year. The downgrade - compared with the 0.6% increase in disposable incomes that the OBR was forecasting in March – was driven mainly by higher energy costs.
While forecasting a modest recovery from next year, the OBR warned that families were facing among the weakest decades for growth in real household disposable income on records dating back to the 1960s.
Setting the stage for a tough election run-up for Labour, the watchdog said disposable incomes in 2029, after taking account of inflation, were on track to be only 1% higher than in 2019 – before the onset of the Covid pandemic.
“If you go back to just before Covid, and take that as your base, where we are right now - seven years later, is virtually no growth in per person real household disposable income,” he said.
As the impact from Donald Trump’s war hits British households, businesses and the government finances, Healey said the exchequer was spending £14bn more on debt interest as the financial market fallout from the conflict pushes up borrowing costs for countries worldwide.
Against a highly uncertain global backdrop, the chancellor said he would allow a hit to his buffer against the government’s fiscal rules – while also announcing a temporary rise in tax on banks to fund his package of…