The UK will experience inflation such on an “astronomical” scale that the savings of millions will be wiped out by the high cost of living and taxes, a leading think tank has warned.
A report from the National Institute of Economic and Social Research has predicted that the United Kingdom is heading towards a recession and that inflation combined with the highest tax burden in seven decades will see 5.3 million people have their savings eliminated.
The findings from the NIESR, seen by The Times, said that the growing economic crisis would see approximately seven million families living from “pay check to pay check” with gas prices and food costs expecting to drive inflation to at least 11 per cent before the end of the year, while the retail prices index (RPI), which determines railway fares and student loan rates, is expected to hit 17.7 per cent.
The report claimed that the UK is already on pace for a recession and that the period of negative economic growth would last into next year.
The think tank said that because of the dire economic outlook, the Bank of England will likely have to raise interest rates to 3 per cent.
The institute’s deputy director, Stephen Millard said that there will be “no respite” for the British economy from the “astronomical inflation” in the near term and that “we will need interest rates up at the 3% mark if we are to bring it down”.
“It’s now up to the Monetary Policy Committee to make sure inflation does come down next year and the new Chancellor to support those households most affected by the recession and cost-of-living squeeze,” Millard said.
The NIESR went on to predict that wage increases below the level of inflation would become baked into the economy by 2026, meaning that the average worker would earn seven per cent less in real terms than prior to the inflationary spiral that begun in during the coronavirus lockdowns.
The director of the think tank, Jagit Chadha, called for more financial support from the government coffers to the poorest segments of society, saying the next prime minister should “focus economic policy on redistributing resources to the most financially vulnerable households and maintain public services”.
The current frontrunner in the race to replace Prime Minister Boris Johnson, Foreign Secretary Liz Truss has called for large tax cuts to help families deal with the cost of living increases.
Her opponent, former Chancellor Rishi Sunak, has argued that tax cuts would fuel inflation and that paying for the lockdown spending — which he presided over — should not be put off to further generations. Sunak has, however, backtracked slightly, saying that he would now in fact support cutting the VAT on energy.
Last month, the candidates in the Conservative leadership contest were told by the globalist International Monetary Fund (IMF) that they should not be looking to provide the British public with tax relief, saying that the UK should use the opportunity of the energy crisis to double down on green energy spending.
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