October 3, 2022

The UK will experience inflation on such an “astronomical” scale that the savings of millions will be wiped out by high living costs and taxes, a leading think tank has warned.

A report by the National Institute for Economic and Social Research predicted that the UK is headed for recession and that inflation combined with the highest tax burden in seven decades will see 5.3 million people wipe out their savings.

The foundings by NIESR, who saw The timessaid the growing economic crisis would leave about seven million families living “pay check to pay check” with gas prices and food costs expected to push inflation to at least 11 percent before the end of the year , while the retail price index (RPI), which determines interest rates on rail and student loans, is expected to reach 17.7%.

The report argued that the UK is already in recession and that the period of negative economic growth will continue into next year.

The think tank said that given the dire economic outlook, the Bank of England would likely have to raise interest rates to 3%.

The institute’s deputy director, Stephen Millard he said that there will be no “respite” for the British economy from “astronomical inflation” in the near future and that “we will need to raise interest rates to the 3% mark if we are to bring it down”.

“It is now up to the Monetary Policy Committee to ensure that inflation comes down next year and the new chancellor supports those households hardest hit by the recession and cost of living squeeze,” Millard said.

The NIESR went on to predict that below-inflation wage increases will enter the economy by 2026, meaning the average worker will earn seven percent less in real terms than before the inflationary spiral began during the coronavirus restrictions. .

The think tank’s director, Jagit Chadha, called for more financial support from government coffers to the poorest sections of society, saying the next prime minister should “focus economic policy on redistributing resources to the most economically vulnerable households and maintain public services”. .

Today’s front-runner in the race to replace Prime Minister Boris Johnson, Foreign Secretary Liz Truss has called for big tax cuts to help families cope with rising cost of living.

Her rival, former chancellor Rishi Sunak, has argued that the tax cuts will fuel inflation and that paying for the spending of the lockdown – which she presided over – should not be deferred to other generations. Sunak has, however, receded slightlysaying that he will now effectively support the VAT cut in energy.

Last month, the candidates in the Conservative leadership contest were told by the globalist International Monetary Fund (IMF) that they should not seek to give the British public tax breaks, saying the UK should use the opportunity of the energy crisis to doubled. reducing costs for green energy.

Follow Kurt Zindulka on Twitter here @KurtZindulka

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