British standard of living plummets
Newcastle upon Tyne, England, United Kingdom (AHN) – Bank of England Governor Mervyn King warned Tuesday that Britain’s standard of living is plummeting fast. He made the warning following the report by the Office for National Statistics that the country’s gross domestic product logged a minus 0.5 percent growth rate for the last quarter of 2010.
The Q4 2010 data went against analysts’ forecast of a 0.4 percent growth for the last quarter of 2010.
He said the decline in standard of living is at the fastest rate in about 90 years, pointing out that with inflation galloping much faster than wage increase, take-home pay of employees will drop in value to their 2005 level.
Take-home pay of workers dipped 12 percent in 2010 and the trend is expected to continue this year. At the same time, Britons would grapple with higher food and fuel costs, on top of an increase by 2. 5 percent in value added tax.
The governor pointed out the dip in living standards is the inevitable price tag of the financial crisis and attempts to rebalance the U.K. and global economies. King stressed the committee cannot and should not prevent the squeeze on real take-home pay.
King forecast inflation rate to go up further between four to five percent in the coming months, which would impact the interest-setting task of the Monetary Policy Committee of the Bank of England. He indicated that the committee would not hike benchmark lending rates from their record-low levels this year.
While Britons are tightening their belts because of the lowering of living standards, bankers just got their millions of bonuses last week highlighting the widening gap between the haves and the have-nots in society.
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