The International Monetary Fund (IMF) has indicated that inflation in the UK will surpass that of any other major advanced economy, including the United States, where tariffs are impacting consumer prices. With GDP growth per capita at a mere 0.4%, the lowest among major economies, real wages have reportedly stagnated for 11 months. Additionally, the unemployment rate has reached 4.8%, the highest level since spring 2021.
The Joseph Rowntree Foundation (JRF) forecasts that by 2029, average disposable incomes will fall by £570, marking the largest decline in living standards observed since 1961. This situation is attributed to what some experts are calling “profit inflation,” where prices are rising independently of wage growth. The UK Treasury, however, asserts that overall spending is appropriate given the economy’s capacity and cites factors like wage rigidity and rising import costs for current inflationary pressures.
Contrary to the Treasury’s view, the Bank of England recently suggested that insufficient job availability is a result of weak underlying demand, rather than solely overheating in the economy. This has coincided with a household saving rate of around 11%, indicating a trend of cautious consumer behavior, alongside declining consumer confidence.
Calls have emerged for targeted fiscal interventions to support struggling households, including increased benefits and enhanced public services. There are recommendations for a budget deficit that could counterbalance the trade gap, as well as suggestions for exploring wealth taxes to address income inequality and improve living standards.
The current circumstances raise questions about the efficacy of the government’s strategies regarding fiscal policies and their impact on public welfare. How should the government reassess its priorities to better support living standards amid ongoing economic challenges?
Source: https://www.theguardian.com/commentisfree/2025/oct/14/the-guardian-view-on-the-imfs-warning-britains-economy-runs-hot-for-profits-cold-for-pay