23 March 2022
If you are covering the Spring Statement and the Office for Budget Responsibility’s economic forecasts, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“While Rishi Sunak announced a number of welcome measures to help households cope with the cost of living crisis, these measures most likely will not go far enough to protect the consumer from a very challenging outlook. The rise in the National Insurance threshold and the cut in basic rate income tax at the end of this parliament will go some way to put more pounds in the pockets of voters ahead of the next general election, but it doesn’t necessarily help people with the here and now. With the war in Ukraine continuing to push up the oil price and utility bills due to rise sharply in the spring, and later in the year, inflation is beginning to bite for businesses and households.
“According to the latest figures, inflation in the UK is already at over 6% and will remain at worryingly high levels for most of the year while the Office for Budget Responsibility also slashed their GDP forecast for this year from 6% to 3.8%. While the unemployment rate is expected to be unaffected by the slowing of economic growth, it does feel as if we are entering a stagflationary period. It will be difficult for the economy to emerge from this without some additional stimulus, but with interest rates on the rise it is a tricky balancing act for the government and the Bank of England.
“The Chancellor still intends to cut taxes as we get closer to the next election and he will be hoping that the improvement in the public finances is not blown off-course by geopolitical events. An uncertain outlook could get even foggier in the months ahead.”
