Charlie Bean, a member of the Budget Monitoring Committee (OBR), has told MEPs that household income will not return to 2019 levels for another two years. He believes that the main reason for this is the “low rate of productivity growth.” The pandemic has succeeded in freezing much of the economy, with many businesses shutting down completely.
The issue of low growth in real family income since the outbreak of the financial crisis has been the topic of the Treasury Committee meeting. In 2008-2024, income is expected to increase by only 2.4%. compared to an increase of 36 percent. In the 16 years preceding the crisis.
“We have a slight increase in productivity (in our projections). However, this is not a return to pre-pandemic levels,” Bean noted. His expectations are similar to those made last week by the Institute for Fiscal Studies with regard to the published draft budget.
His assumptions also portend poor financial prospects for individuals in the near future, suggesting that lower inflation and higher taxes will prevent most wages from growing. It also found that low-income families would also suffer a “hit” as the cost of living would rise faster than interest levels.
Meanwhile, OBR Chairman Richard Hughes said Finance Minister Rishi Sunak may struggle to achieve his goals in terms of reducing debt and balancing the current budget deficit over the next three years.
He estimated that “the reserve that he set for himself to achieve these goals is the second lowest reserve ever owned by the Minister of Finance when setting the budget rules.” At the same time, he noted, the scope for errors is very minimal: “A 1 percent increase in interest rates is enough to easily destroy the minister’s assumptions,” he said.
The Bank of England’s Monetary Policy Committee is due to meet on Thursday to decide on a rate hike from the historically low 0.1 per cent.
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