The important economic story you may have missed during Boris Johnson's downfall

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Several major stories happened while the nation was focused on the downfall of Boris Johnson. (PA)
Several major stories happened while the nation was focused on the downfall of Boris Johnson. (PA)

As the country and media were gripped by the collapse of Boris Johnson's government and his subsequent resignation, the UK's fiscal watchdog released a crucial report on the country's financial future.

The prime minister resigned on Thursday after dozens of his ministers quit and hordes of backbenchers turned on him over his handling of the Chris Pincher scandal.

Meanwhile, the Office for Budget Responsibility (OBR) released a key forecast warning the UK is on the path to a recession.

UK on path to recession from cost of living crunch and ballooning debt

The report from the OBR warned the UK's public finances are on an “unsustainable path”, with government debt levels at risk of more than trebling and tax increases needed to offset rising cost pressures.

The OBR went on to say soaring energy prices and inflation threaten to tip the UK into recession.

The OBR said the government has already spent as much this year – 1.25% of gross domestic product (GDP) – to help households cope with the cost squeeze as it did supporting the economy through the financial crisis.

In its fiscal risks and sustainability report, the OBR predicted debt could rise from 96% currently to more than 100% of GDP by 2052-53 and reach 267% of GDP in 50 years if upward pressures on health, pensions and social care spending, and the loss of motoring taxes due to the transition to electric cars, are factored in.

The OBR said bringing debt back to 75% of GDP, the level at which it stabilised in the government’s pre-pandemic March 2020 Budget, “would need taxes to rise, spending to fall, or a combination of both”.

Read more: Martin Lewis: UK needs ‘new leaders in office asap’ ahead of ‘catastrophic’ winter

The possibility of further tax rises will be worrisome for many. (PA)
The possibility of further tax rises will be worrisome for many. (PA)

The OBR said the Ukraine war, soaring energy prices and long-term pressure on the nation’s finances “add up to a challenging outlook for this and future governments as they steer the public finances through inevitable future shocks”.

The report said: “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.”

Here are two more crucial stories you might have missed:

Russia 'pauses' assault in Ukraine

On Wednesday, Russian forces made no claimed or assessed territorial gains in Ukraine "for the first time in 133 days of war," according to the Institute for the Study of War.

The think tank based in Washington suggested that Moscow may be taking an “operational pause," but that it does not entail “the complete cessation of active hostilities."

The war in Ukraine has quietened down in recent days as Russia redeploys its troops. (AP)
The war in Ukraine has quietened down in recent days as Russia redeploys its troops. (AP)

A Thursday statement from Russia’s Defense Ministry seemed to confirm that assessment. It said Russian military units involved in combat in Ukraine had been given time to rest.

"The units that performed combat missions during the special military operation are taking measures to recover their combat capabilities. The servicemen are given the opportunity to rest, receive letters and parcels from home," read the statement, quoted by Russian state news agency Tass.

Despite this Russian shelling killed at least nine civilians and wounded six in 24 hours between Wednesday and Thursday.

British Airways averts strike but cancels flights

BA managed to avert a summer of strike action by its Heathrow staff after the company made an improved pay offer.

Extensive negotiations were held on Wednesday and an agreement was reached.

The check-in workers voted to take industrial action in a dispute over pay, saying a 10% wage cut during the height of the pandemic had not been reversed.

The two unions involved, Unite and GMB, said they would now ask members to vote on the new offer.

The news will come as a relief for BA executives who are already facing an exceptionally difficult summer.

Read more: British Airways plane catches fire on runway forcing passengers to be evacuated

BA has cut thousands of flights this summer. (PA)
BA has cut thousands of flights this summer. (PA)

On Wednesday they were forced to axe another 10,300 short-haul flights until the end of October.

The move takes the percentage of cancellations across the airline to a total of 13% this summer.

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