Michael Gove, the secretary for levelling up, has acknowledged that the epidemic and the crisis in Ukraine have both made the UK poorer than it otherwise would have been.
Yet he said that ministers were acting to address the skyrocketing cost of living, such as by providing assistance with energy bills.
Living standards are seeing their greatest squeeze ever, according to the chairman of the independent forecaster, the Office for Budget Responsibility (OBR).
Richard Hughes claimed that the impact of Brexit was comparable to that of the pandemic.
“It’s a shock to the UK economy on a par with earlier shocks like those caused by the epidemic and the oil crisis,” he said. According to him, low productivity has also impacted growth. However, he cautioned that it would take another five to six years for the standard of living to reach pre-pandemic levels.
When asked if he concurred with the OBR’s conclusions, Mr. Gove responded that economic forecasting was a very difficult exercise. He continued by saying that “the aftershocks of two important events were being felt in the UK.”
Even though the administration has been in power for 13 years, Mr. Gove said, “One can always do better, certainly.”
He stressed, though, that ministers were taking measures to combat the escalating inflation rate, which is the rate at which prices grow, by taxing the profits of oil and gas companies and bringing down consumer energy costs.
He added that the budget had made provisions to assist people in finding employment and to assist families, especially with childcare.
As food and energy costs rise more slowly than expected, the OBR predicts that inflation will drop below 3% this year from its current rate of 10.4%.
Richard Hughes, the head of the OBR, noted, however, that the picture was uncertain because Britain was a net importer of food and energy, the costs of which were determined by international markets.
The real spending power of people, after accounting for inflation, is not expected to return to pre-pandemic levels until the end of the decade, Mr. Hughes continued, adding that the longer-term outlook for the economy was grim. However, he stated that the entire output was anticipated to be 4% lower than it would have been had the UK left the EU.
The Bank of England continued its fight to reduce inflation last week by raising interest rates for the eleventh time since December 2021.
After the unexpected increase in the inflation rate to 10.4% last month, the decision was made to raise rates to 4.25% from 4%>