The official UK economic forecaster has issued a stark warning that 2023 is going to be a “very difficult year” for households crippled by the cost-of-living crisis. But Office for Budget Responsibility (OBR) committee member David Miles said the country will turn a corner in 2024.
Mr Miles’ warning comes just days after the OBR forecast that Britain faces a recession lasting more than a year.
It also comes as Rishi Sunak warned soaring inflation, strikes and spiralling NHS waiting lists will cause a “challenging” winter.
Speaking to the Treasury Committee this afternoon, Mr Miles said the impact of rising interest rates and continued inflation will cause pressure next year.
The economist said: “2023 is going to be a very difficult year, very likely, but the years after it will not be quite as bad.”
But the forecasting body’s latest economic forecasts appear more optimistic by those revealed by the Bank of England earlier this month.
OBR chair Richard Hughes said its longer term growth projections are more positive as interest rate expectations and energy price futures declined between the two forecasts.
The OBR also said it is predicting that more people will use their savings to support spending habits despite continued cost of living pressures.
Mr Hughes also told MPs that governments should not make fiscal decisions without an “up-to-date economic outlook” following the economic fallout of the mini-budget.
Former PM Liz Truss and ex-chancellor Kwasi Kwarteng came under fierce scrutiny in September after they announced sweeping tax cuts and spending measures without economic forecasts.
The pair told Mr Hughes on September 7 that they would not seek economic forecasts for a fiscal announcement on September 23.
However, concerns over the unfunded nature of the fiscal announcement and a lack of clarity over the economic outlook caused the pound to slide to a record low against the US dollar.
The economic turmoil contributed to the short tenure of the Truss administration, with the spending plans largely reversed by new chancellor Jeremy Hunt.
Mr Hughes said: “The committee in its own reports has commented on the growing tendency in UK fiscal policy making for major policy announcements to happen without forecasts.
“Good practice as defined by anyone, not just us but international institutions, would say you shouldn’t make fiscal decisions without them being informed by an up-to-date view of the economic outlook.”
It comes as the Prime Minister today braced his Cabinet for more misery in the coming months.
With nurses voting to strike, Health Secretary Steve Barclay warned the NHS backlog had already been “significantly exacerbated” by the Covid pandemic.
Downing Street said 400,000 people were currently waiting more than 52 weeks for operations, compared with 1,600 before Covid-19 hit.
Food prices and energy bills have soared as inflation hit a 41-year-high of 11.1 percent, with global fuel prices being forced up by Vladimir Putin’s brutal war in Ukraine.
Giving an account of the Cabinet meeting, the Prime Minister’s official spokesman said: “Looking ahead to winter, the Prime Minister said this would be a challenging period for the country caused by the aftershocks of the global pandemic and the ongoing conflict in Ukraine.”