24.11.17
Living standards set to fall for longest period yet , think tank says
Britain is heading for the longest period of falling living standards since records began, the Resolution Foundation has warned this week.
In its analysis of the Autumn Budget, the Foundation found that real household disposable income is set to fall for an “unprecedented 19 successive quarters between 2015 and 2020.”
With changes to Universal Credit, tax and benefit policies announced since since summer 2015, the poorest third of households will be worse off by an average of £715 a year by the end of parliament, yet the richest third will benefit from an extra £185, according to the report, ‘Fresh Squeezed.’
The report predicts that, on a 10 year rolling basis, productivity is set to fall by 0.1% by the end of 2017, making this the worse decade for productivity since 1812.
Consequently, the foundation predicts that the economy will be £42bn smaller in 2022, compared to the March 2017 forecast.
The foundation claims that these projections, combined with Hammond’s decision to “accept that public finance deterioration and increase it by a further £15bn”, means that he has abandoned the Conservative manifesto aim of reaching an absolute surplus by the middle of the decade.
It notes that budgets are set to be 16% lower in 2022-23 than in 2010-11, whilst capital spending per person is set to exceed pre-crisis levels by the start of the next decade, and if the chancellor did choose to meet the manifesto aim, it would require the pace of deficit reduction to double in the three years running up to 2025-26.
However, the foundation has welcomed the Budget’s focus on housing, with spending levels set to drive progress towards building 300,000 homes a year.
Although it also claims that the abolition of stamp duty for many first time buyers will have a cumulative cost of £3bn, which it says could be better spent on building more homes.
Resolution Foundation director, Torsten Bell, said: “Following years of incremental changes, yesterday the OBR handed down the mother of all economic downgrades pushing up borrowing for the Treasury.”
He called the outlook for families “deeply troubling,” with their disposable income dropping for the longest period in over 60 years.
Bell said: “On the substance of the Budget the chancellor has made the right call in boosting housing investment and focusing on this key issue of intergenerational concern.
“However, yesterday’s stamp duty rabbit is in reality a very poor way to boost home ownership.
“Its £3bn cost could have been better spent building 140,000 new homes through the government’s own Housing Investment Fund.
“Faced with a grim economic backdrop the chancellor will see this Budget as a political success.
“But that would be cold comfort for Britain’s families given the bleak outlook it paints for their living standards.”
Hoping that the foundation’s predictions do not come to fruition, Bell concluded: “While the first sentence of the Budget document reads ‘the United Kingdom has a bright future’, the brutal truth is: not on these forecasts it doesn’t.”
Top Image: Gregory Lee
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