UK Office for Budget Responsibility: standard of living to fall for two years

Households face falling standards of living for at least another two years as rising prices outstrip wage increases, the Government’s official economic forecaster has warned.

Inflation will exceed expected salary increases until the middle of 2013, more than five years after the onset of the recession, figures from the independent Office for Budget Responsibility (OBR) suggest.

The predicted squeeze is far worse than ministers had previously signalled. A typical middle-class family will see their disposable income fall by more than £1,500 this year as a result.

In one possible scenario, the OBR, set up by George Osborne to provide economic forecasts, suggests that high inflation could result in a twelvefold rise in Bank of England interest rates, up to six per cent, plunging many households into difficulty.

The disclosure of the new forecasts, which were published alongside the Chancellor’s Budget on Wednesday, came as:

• Forecourts were accused of “ripping off” drivers by putting up the price of petrol hours before the Budget, only to lower it with a fanfare once the 1p cut in duty was announced (read more)