UK, Liz Truss will be the new Prime Minister
The new Prime Minister of the United Kingdom it faces a number of burning issues that require urgent attention. These include the cost-of-living crisis triggered by 40-year high inflation, skyrocketing energy prices, a series of strikes and the unresolved difficulties surrounding the decision by the United Kingdom to leave theEuropean Union.
The cost of living crisis
In the coming months, British households will face a multi-pronged income squeeze. By the end of 2022, double-digit inflation is expected, as well as a double-digit decline in discretionary spending, as the near-doubling of wholesale gas prices since May 2022 impacts on retail energy prices paid by British families. The UK’s median household income (after tax) is £ 31,400 – a £ 1,500 increase in energy bills for the typical household equates to around 5% of annual income. The rise in mortgage costs appears to be of a similar magnitude.
Since the beginning of the year, household income has grown thanks to a lively labor market and the use of savings accumulated during the lockdowns linked to Covid-19. The ASDA food chain income tracker (started 2011) in July 2022 shows a 16.5% year-over-year decline in UK household income (excluding bonuses) after tax and prime commodity spending need. This equates to a loss of 40 pounds a week, and is likely to increase further.
The savings accumulated during the pandemic – estimated at around £ 190 billion – are not evenly distributed. Low-income households typically have little or no savings, and poorer households will feel the squeeze more keenly than those with middle or high income. Nearly a quarter of all households have no savings and another 9% have savings of £ 250 or less. With inflation likely to exceed the 13% peak predicted by the Bank of England (BoE), workers will not be in a better position by mid-2023 than they were 20 years earlier (according to research from the Resolution Foundation).
Liz Truss has called for tax cuts of over £ 30 billion in an effort to stimulate the economy and avert a possible recession. Further political support could come from the reversal of the increase in social security contributions introduced by the current administration to increase funds earmarked for adult social assistance.
An additional £ 30 billion could be disbursed through Universal Credit (social security payments), raising income tax deduction thresholds (the level after which you start paying taxes) or through reductions in the level of income tax. VAT.
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