UK standard of living set to fall
Consumers may have to spend less on meat and dining out as the standard of living is predicted to plunge.
Families will be worse off than they were in 2005, as wage rises fail to keep pace with the cost of living, Mervyn King, the Bank of England Governor, has warned.
He said: “We are experiencing a period of uncomfortably high inflation.”
“The determinants of inflation further ahead remain consistent with inflation falling back quite sharply next year.”
King added that Britons should expect inflation to rise to between 4% and 5% over the next few months.
“With the standard rate of VAT rising to 20% this month, and recent further increases in world commodity and energy prices, inflation is likely to rise to somewhere between 4% and 5% over the next few months, before falling back next year.”
The comments made in a speech at Newcastle’s Civic Centre, come as figures showed the economy shrank by 0.5% in the last three months of 2010.