Families across the UK are in for a rocky financial path over the next few years, as a spending watchdog warns people will feel increasingly poorer.
A spending watchdog called for tax cuts and slashing of excessive spending to halt the national debt, which could treble in 50 years.
The Office for Budgetary Responsibility (OBR) warns many families could lose up to four percent of disposable income next year – around £1,200 for the average household.
The spending watchdog is worried that if the cost of living crisis continued to cripple the country, with skyrocketing energy prices, the economy may shrink by two percent.
Families face being plunged into economic misery
Dominic Lipinski
According to the OBR, government ministers have already spent 1.5 percent of Britain's GDP on measures to halt the growing cost of living crisis.
Experts outline how Whitehall debt will likely exceed more than 100 percent of GDP by 2050, so the government "would need taxes to rise, spending to fall, or a combination of both".
That would force cuts of £37billion a year.
The cost of living crisis is plaguing the UK with inflation rates skyrocketing
Dave Thompson
The Ukraine war, soaring energy prices and intensifying pressure on the nation's finances have created a "challenging outlook for this and future governments", say the OBR.
The watchdog added: “Many threats remain, with rising inflation potentially tipping the economy into recession, continued uncertainty about our future trading relationship with the EU, a resurgence in Covid cases, a changing global climate and rising interest rates all continuing to hang over the fiscal outlook.”
Simon Clarke, treasury minister, responded to claims for the OBR, saying: “The government is ensuring it continues to support people and the economy in the face of global pressures and uncertainty while reducing debt.”
But Labour's shadow chancellor Rachel Reeves maintained her viewpoint, saying: "We need a serious plan for growth and a stronger, more secure economy".
Comments from the Office for Budgetary Responsibility follow the plummeting of the pound on Tuesday, when it hit a two-year low against the dollar, amid intensifying fears for the future of Britain's economy.
Chancellor Rishi Sunak and Health Secretary Sajid Javid dramatically quit their Cabinet roles on Tuesday, with both stating they had lost confidence in the PM.
This followed a number of scandals to hit the Government, the latest being the resignation of Deputy Chief Whip Chris Pincher.
Despite the ominous outlook, the pound rose against the dollar yesterday after Boris Johnson resigned from his role as leader of the Conservatives.
Following the news of Mr Johnson's decision, the pound performed well in the markets with sterling gaining 0.4 percent to $1.197.