National Institute of Economic and Social Research Jeremy Hunt calls for a boost in public investment in its looming statement in the autumn, while hailing increases in minimum wage levels.
The poorest half of UK households will have to wait until the end of 2026 for their real incomes to return to pre-coronavirus levels, according to independent analysis.
The National Institute for Economic and Social Research (NIESR) said that low- and middle-income families face seven years of declining living standards due to the repercussions of the pandemic, and recently the continuation of… Cost of living crisis.
Lockdowns and restrictions on profits, followed by higher prices and the Bank of England High interest rates Since December 2021 to help tame inflation, this has meant that wages have often struggled to keep pace with both price growth and rising borrowing costs.
an average Economic inflation Last year it peaked above 11% but is currently at 6.7%.
The annual pace of price increases is expected to decline significantly last month.
This is mostly due to the worse impact on energy bills as a result of the Russian invasion of Ukraine, which was not included in the calculations.
However, real income, which takes inflation into account, in the bottom half of the income distribution, will be around 5% lower in the 2023/24 financial year than in the year ending March 2020, the National Institute for Economic Research said.
This is despite average wages rising by about 7% this year, a figure that is expected to remain at the same level next year.
“Most families are just one paycheck away from homelessness.”
Professor Adrian Pabst, deputy director of policy at NIESR, said: “The rise in real wages this year is a welcome boost, especially for low-income working families who have been hit hard by the Covid and inflation shocks.
“But a return to pre-pandemic living standards will require sustained growth in real wages, including further increases in the national living wage.”
The National Institute of Economic and Social Research’s latest quarterly forecast report said that if living standards rose and helped boost the country’s “anemic” economic growth, public investment should be the focus of the looming autumn statement.
The ‘financial dilemma’ facing Jeremy Hunt
Chancellor of the Exchequer Jeremy Hunt has ruled out a tax giveaway before the election and has also signaled a focus on reducing debt.
The lack of new spending or tax cuts, while difficult for many Tory MPs worried about their seats, will help the government’s goal of halving inflation this year.
The National Institute for Economic Research believes the Bank of England will not have to impose further interest rate increases beyond the 14 consecutive increases it has already seen, given that inflation is expected to continue to fall sharply.
The bank’s report warned that although rising borrowing costs, which have exacerbated shocks to household bills, may have peaked, there is no prospect of the bank’s interest rate returning to its coronavirus-era level of 0.1%.
Interest rates have been seen stabilizing at levels closer to 3-3.5%, with the first declines expected later next year.