Household disposable income will fall by more than seven per cent in real terms over the next two years - the biggest drop since records began in 1956, according to the Office for Budget Responsibility (OBR). It says the the drop of 7.1% in real terms over this year and next year will mean disposable income will still be below pre-pandemic levels by 2028.
The warning came following Chancellor Jeremy Hunt's Budget yesterday, which outlined billions of pounds of tax rises and spending cuts and which was greeted by charities warning that struggling Brits face a "frightening obstacle course just to afford the essentials". The OBR confirmed that the UK has gone into a recession, which it predicts will last "just over a year" - during which time more than half a million people will lose their jobs. It says that unemployment will hit 4.9% by mid-2024, up from 3.5%.
In its report the OBR said: "The UK is being hit by a large terms of trade shock that is set to push inflation to its highest rate in 40 years and drive historic falls in real household disposable income. This inevitably makes households worse off."
