In a statement this spring, the Institute for Fiscal Studies (IFS), an economic think tank, warned. Rishi Sunak must decide "whether to spend billions of dollars at any time, at least after the financial crisis, and perhaps since the 1970s, or to hurt household income," the IFS said.
Russia's invasion of Ukraine has shaken the global commodity market in an effort to reduce or ban crude oil and gas imports in the United States, United Kingdom and the EU and push prices up from other sources. According to the IFS, energy prices, which were already high before the conflict, could now cost £43 billion to homes. This was offset by a £9 billion package of energy cost savings developed by the Treasury prior to Russia's aggression and consequent sanctions. According to the IFS, government intervention "offsets only about one-fifth of the increase in household energy prices."
Before the Covid 19 pandemic and Brexit made a major change in government policy, the Treasury intended to hold a budget event only once a year with an autumn budget and a spring statement. However, given the enormous pressure on households, this is unlikely, the IFS said.
Paul Johnson, Director of the IFS, said: “Will he work harder to protect households from the effects of energy prices that have been rising over the past two weeks? Financial crisis. If so, there would be another big financial blow,” Johnson added.
In an illustration of how the Russian invasion has changed the scale of the hit to households, a person earning £27,500 a year would have been £500 worse off by 2023, prior to the attack on Ukraine, according to forecasts from Citigroup, a bank and financial services company and shared by the IFS. This has now climbed to an £800 hit. Meanwhile, someone on nearly £42,000 will be £1,300 worse off now, compared to a pre-Russian invasion estimate of £900.
According to an analysis by the IFS, the impact of high interest rates aimed at slowing inflation will hurt public finances, with many economists saying they will rise to more than 8% in April. Rising inflation since October last year could increase government debt in 2021 by about £11 billion.
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