If, as a result, the Bank of England needs to raise interest rates faster, Pickering added, it risks “causing a recession.” Unemployment would be much worse for the standard of living than high energy prices, that’s for sure. “
Alan Monks of JP Morgan expects the Monetary Policy Committee (MPC) to have to add a further rate hike this year as a result, with the key interest rate rising from 1% now to 2% by the end of this year. and 2.75% by August 2023.
Contingency tax “insufficient”
Meanwhile, this move is bad for public finances.
Investec’s Sandra Horsfield says the contingency tax is “by no means enough” to cover the £ 37bn that Sunak has promised to tackle the UK cost of living crisis.
“The rest seems to come from higher loans and the use of part of the ‘military chest’, created in part by past loans, which has been consistently revised downwards,” she said.
“Putting public finances in better shape has been canceled in light of the amount of pressure on household budgets.”
But with the added sting of another tax increase, it also risks hurting the economy.
Jagjit Chadha, director of the National Institute for Economic and Social Research, said: “We are once again exposed to the spectacle of policies that hinder good economics.
“When it comes to taxes, it’s worth remembering that if we act hastily, we can repent in our spare time.
“Taxes can and should come later, support must come now.”
When it comes to individuals, the Chancellor’s living expenses support package will be unevenly beneficial to society. This will offset less than a fifth of the cost increases facing middle-class families this year.
Sunak has announced a £ 200 discount on household energy bills this autumn, which will now double to £ 400. This is in addition to the reduction in the municipal tax of 150 British pounds, given to 80 percent of homes in England in taxes from A to D.
Although bills are rising everywhere, however, Sunak’s support risks not protecting middle-class consumers who will not receive measures such as £ 650 in social assistance for households with a benefit test.
Middle-income families are facing an increase in bills of nearly £ 4,000 this year, according to an analysis by the Telegraph, with payments to the state representing only 14% of that total.
Energy bills rose by an average of 693 pounds in April and will rise further in October, when the energy price cap rose to 2,800 pounds – 42% more than current levels. This means that the average household will pay an additional £ 1523 a year compared to last winter, warned the regulator Ofgem.
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