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| People face biggest fall in spending power for 70 years | People face biggest fall in spending power for 70 years |
| (about 13 hours later) | |
| The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. | The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. |
| The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. | The UK is expected to avoid a technical recession in 2023, Jeremy Hunt tells the Commons. |
| People face their biggest fall in spending power for 70 years as the surging cost of living eats into wages. | People face their biggest fall in spending power for 70 years as the surging cost of living eats into wages. |
| The government's independent forecaster said that household incomes - once rising prices were taken into account - would drop by 6% this year and next. | The government's independent forecaster said that household incomes - once rising prices were taken into account - would drop by 6% this year and next. |
| Living standards won't recover to pre-pandemic levels until 2027, it warned. | Living standards won't recover to pre-pandemic levels until 2027, it warned. |
| It came as Chancellor Jeremy Hunt said the economy would shrink this year but avoid recession. | It came as Chancellor Jeremy Hunt said the economy would shrink this year but avoid recession. |
| Energy and food bills have shot up due to the war in Ukraine and pandemic, and are squeezing household budgets. | Energy and food bills have shot up due to the war in Ukraine and pandemic, and are squeezing household budgets. |
| Inflation - the rate at which prices are rising - is currently in double digits. | Inflation - the rate at which prices are rising - is currently in double digits. |
| Budget 2023: Key points at-a-glance | Budget 2023: Key points at-a-glance |
| What the Budget means for you and your money | What the Budget means for you and your money |
| Tax on company profits to rise to 25% next month | Tax on company profits to rise to 25% next month |
| It is set to more than halve to 2.9% by the end of this year, according to the Office for Budget Responsibility (OBR). But for now, the figure remains very high, and well ahead of average wages. | It is set to more than halve to 2.9% by the end of this year, according to the Office for Budget Responsibility (OBR). But for now, the figure remains very high, and well ahead of average wages. |
| The drop in real household disposable income would represent "the largest two-year fall in living standards since records began in the 1950s," Richard Hughes, chairman of the OBR, said. | The drop in real household disposable income would represent "the largest two-year fall in living standards since records began in the 1950s," Richard Hughes, chairman of the OBR, said. |
| "We think households are going to dip into some of their savings to help manage the squeeze on living standards and that supports growth in the near term,"he added. | "We think households are going to dip into some of their savings to help manage the squeeze on living standards and that supports growth in the near term,"he added. |
| The OBR looks at the government's tax and spending plans in the Budget and then predicts how the country will perform over the next five years. | The OBR looks at the government's tax and spending plans in the Budget and then predicts how the country will perform over the next five years. |
| Previously it had expected the UK to fall into recession at the end of last year and continue to shrink all of this year. | Previously it had expected the UK to fall into recession at the end of last year and continue to shrink all of this year. |
| A recession is usually defined as when an economy gets smaller for two three-month periods - or quarters - in a row. | A recession is usually defined as when an economy gets smaller for two three-month periods - or quarters - in a row. |
| The last time the UK's economy went into recession was in 2020, at the height of the coronavirus pandemic. | The last time the UK's economy went into recession was in 2020, at the height of the coronavirus pandemic. |
| The OBR now expects: | The OBR now expects: |
| The economy to contract by 0.2% this year but avoid a recession | The economy to contract by 0.2% this year but avoid a recession |
| It will then grow by 1.8% in 2024, 2.5% in 2025 and 2.1% in 2026 | It will then grow by 1.8% in 2024, 2.5% in 2025 and 2.1% in 2026 |
| Chancellor Jeremy Hunt said the predictions from the OBR were "proving the doubters wrong". | Chancellor Jeremy Hunt said the predictions from the OBR were "proving the doubters wrong". |
| But Labour criticised the announcements made during the Budget as "dressing up stagnation as stability". | But Labour criticised the announcements made during the Budget as "dressing up stagnation as stability". |
| Chemicals boss Adrian Hanrahan is worried about rising prices | Chemicals boss Adrian Hanrahan is worried about rising prices |
| Adrian Hanrahan, managing director of chemicals firm Robinson Brothers in the West Midlands, says that while the forecast is for inflation to fall, at the moment it is very high. | |
| That's a huge challenge for the business, he told the BBC. | That's a huge challenge for the business, he told the BBC. |
| "I would love to consider growth and we all aspire to growth," he said. | "I would love to consider growth and we all aspire to growth," he said. |
| "However, the challenges right now are for us to cope with high energy costs, lack of resources, and labour shortages. Every penny we've got is going into manufacturing, not investing." | "However, the challenges right now are for us to cope with high energy costs, lack of resources, and labour shortages. Every penny we've got is going into manufacturing, not investing." |
| The biggest issue Robinson Brothers is grappling with currently is high energy prices, and Mr Hanrahan was disappointed not to hear anything in the Budget to address that. | The biggest issue Robinson Brothers is grappling with currently is high energy prices, and Mr Hanrahan was disappointed not to hear anything in the Budget to address that. |
| "All very well talking about growth in two or three years time. It's the here and now that we want, and that wasn't available from the Budget today." | "All very well talking about growth in two or three years time. It's the here and now that we want, and that wasn't available from the Budget today." |
| 'Out of touch' | 'Out of touch' |
| Independent research group the Institute for Fiscal Studies (IFS) said the economic picture had not changed "enormously since the autumn". | Independent research group the Institute for Fiscal Studies (IFS) said the economic picture had not changed "enormously since the autumn". |
| IFS director Paul Johnson said the OBR "expects the economy to grow a bit faster in the short-term, and a bit slower in the medium-term". | IFS director Paul Johnson said the OBR "expects the economy to grow a bit faster in the short-term, and a bit slower in the medium-term". |
| This would combine to create an economy that was "0.6% larger in real-terms in 2027-28 than under the autumn forecast," he said. | This would combine to create an economy that was "0.6% larger in real-terms in 2027-28 than under the autumn forecast," he said. |
| Meanwhile, Labour leader Sir Keir Starmer accused the government of being "out of touch" and putting the country "on a path of managed decline". | Meanwhile, Labour leader Sir Keir Starmer accused the government of being "out of touch" and putting the country "on a path of managed decline". |
| The chancellor also said the UK was on track to meet the government's self-imposed spending rules. | The chancellor also said the UK was on track to meet the government's self-imposed spending rules. |
| According to these rules, government debt must be falling as a percentage of growth in five years' time. | According to these rules, government debt must be falling as a percentage of growth in five years' time. |
| How can we avoid a recession and still shrink? | How can we avoid a recession and still shrink? |
| The chancellor has announced that the economy will avoid a "technical recession" this year, but that doesn't mean we're out of the woods. | The chancellor has announced that the economy will avoid a "technical recession" this year, but that doesn't mean we're out of the woods. |
| The size of the economy - the value of everything we make and produce this year - is set to fall by about 0.2% according to the chancellor's figures. | The size of the economy - the value of everything we make and produce this year - is set to fall by about 0.2% according to the chancellor's figures. |
| It becomes a "technical recession" if the economy shrinks for two seasons (three-month periods) in a row. So it's possible to avoid the technical definition even if the economy is doing badly if it shrinks in the spring and autumn but rises in the summer. | It becomes a "technical recession" if the economy shrinks for two seasons (three-month periods) in a row. So it's possible to avoid the technical definition even if the economy is doing badly if it shrinks in the spring and autumn but rises in the summer. |
| A forecast of a 0.2% shrinkage may be better than we thought last autumn (shrinking by 1.4%) but it's hardly anyone's definition of doing well. | A forecast of a 0.2% shrinkage may be better than we thought last autumn (shrinking by 1.4%) but it's hardly anyone's definition of doing well. |
| Additional reporting by Oliver Smith. | Additional reporting by Oliver Smith. |
| Related Topics | Related Topics |
| Economics | Economics |
| UK economy | UK economy |
| Jeremy Hunt | Jeremy Hunt |
| Budget 2023 | Budget 2023 |