Geoffrey Smith 

Investing.com — For the last two years, Prime Minister Boris Johnson and his team have been . However, it’s his voters who are going to feel the hangover.

While the British media may be content to focus on Downing Street’s scandal of violating Covid rules and ignore the real economic storm that is coming, it will prove to be a much more difficult test. By May, it is safe to say, many voters – especially poorer ones – will be feeling nostalgic for the times when they only had to worry about a party here and there.

Britain is not the only country facing these looming challenges. It is only the public rage at the government’s hypocrisy and disingenuous maneuvering to escape the consequences of its actions that really distinguishes the country’s experience of the post-Covid hangover from elsewhere. As with many other aspects of the pandemics, what happens in Britain is likely to occur elsewhere in Europe. There’s a time lag.

Already, the first economic shock is here. The inflation rate is now at its highest level since 1992. The Bank of England raised its key interest rate by 15 basis points in December. Many are expecting it to rise again Wednesday.

Interest rate hikes may not have quite the dramatic effect on the economy as they once did – too many homeowners now have fixed-rate mortgages for that. But they will still make credit – especially consumer credit – more expensive. This is important now that U.K. consumers, having run down their pandemic-era savings, are again borrowing in large amounts again – despite a six-month run of deteriorating consumer confidence.  

It will now be Ofgem, the U.K. regulator of energy. Feb. 7^Th, it’s due to announce the new price cap on retail energy bills, which will come into force from April. Given the extraordinary combination of factors that have pushed wholesale market prices higher, this is likely to rise by as much as 50%, adding hundreds of pounds a year to the average household’s energy costs.

Ofgem has already raised its price ceiling by 12% since October.

As spring approaches, consumers tend to consume less energy. However, there will be no avoiding a separate hit in April from the government’s planned tax increases.

From April, the national insurance contribution, which is a tax on earned income and will go up by 1.25 percent to pay for a long-overdue program to support social care for seniors. The Prime Minister Boris Johnson, his Treasury Chief Rishi Sunak, and the Conservative Party’s low-tax wings, pointing to improved than expected government borrowing statistics, wrote that there was no revolt. They are still determined to get it done.

Higher-rate taxpayers will see their dividend income tax rise by 1.25 percentage points, to 33.75%.

These factors are enough to test any government’s popularity. They are however exposed to damaging information about Johnson and his crew’s partying ways through the pandemic in Britain. Tens of thousands were left mourning, sickened, and lagging. 

It may not matter to global markets which of Johnson’s many scandals ultimately bring him down. But it will be an interesting test case for Europeans to see what parts of Johnson’s program gets abandoned and what is kept as the Conservative Party scrambles to keep its 12-year grip on power.