Published by Forbes 31 Mar 2022
Inflation in the UK has now hit 6.2%, according to recently released figures from the Office for National Statistics. This increase will result in the biggest fall in living standards in thirty years. Expectations are for inflation to rise even further, possibly topping 8% in the UK. It’s a trend we’re seeing around the world – one that will result in difficult conversations and even harder decisions being taken in households everywhere. During his Spring Statement (a kind of ‘mini-budget’ that updates the main fiscal announcements of the previous Fall), Chancellor Rishi Sunak attempted to tackle the current cost-of-living crisis by delivering what he said were some of the biggest tax cuts in over a decade. We saw a reduction in fuel duty of £0.05 a liter, a raising of the National Insurance (Social Security) payment threshold and a promised fall in income tax of £0.01 per British pound from 2024. Will this be enough to keep people out of poverty and having to choose between heating and eating? These measures are not especially targeted to those most in need, but they are quick. What was lacking in the statement was any meaningful help for the poorest in society who will feel inflation the most. The value of the UK state benefits program is expected to be eroded by up to £10bn over the next 12 months due to rising inflation. Those who rely on this support to make ends meet will find it doesn’t stretch as far as it used to. At the moment our economy is in crisis mode – with inflation out of control, drivers having to dig deep into their pockets at the pumps and the cost of groceries rising by an average of 5%. This Spring Statement attempted to tackle these near-term challenges with broad and quick fixes. Of course, it won’t just be individuals and businesses that feel the shock of inflation. The public sector is also at risk. The essential services they provide, authorities’ energy bills, and procurement contracts and building supplies will all be affected by rising prices. The question is – will services have to be cut to balance the books? The Chancellor said he is there to make the difficult arguments, and indeed the difficult decisions. But it seems that the announcements were all reactionary to current pressures, and long-term financial management and sustainable economic solutions took a back seat. This article was written by Rob Whiteman from Forbes
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