- Stark new report shows the UK faces the lowest productivity growth since 1812.
- Resolution Foundation Budget analysis shows Britain is on course for the longest period of falling living standards since the 1950s.
- Treasury analysis finds poorest households will be hit hardest by long-term policy.
LONDON – The United Kingdom is on course for its longest period of falling living standards since records began in the 1950s, analysis published following the Budget has found.
The report published by the Resolution Foundation titled “Freshly Squeezed” says that there is a “bleak outlook” for Britain’s families, as living standards fall for the longest period ever documented.
The analysis shows that average wages will not return to their 2007 peak until 2025, three years later than was forecast in the Budget in March of this year.
The think tank also found that the Office of Budget Responsibility handed Philip Hammond the biggest downgrade to productivity forecasts since its creation in 2010, as the OBR slashed its growth forecasts for the UK economy as well.
The chancellor announced that GDP growth forecasts had been revised down every year until 2021, including from 2% to 1.5% in 2017, partly due to waning productivity but also due to uncertainty over Brexit.
The report shows that productivity growth will be at just 0.1% by the end of 2017, which would make this the worst decade for productivity growth since 1812 when Britain was in the midst of the Napoleonic Wars.
Torsten Bell, the director of the Resolution Foundation said: “Following years of incremental changes, yesterday the OBR handed down the mother of all economic downgrades pushing up borrowing for the Treasury.
“While Philip Hammond chose to take a relaxed approach to additional borrowing, families are unlikely to do so when it comes to the deeply troubling outlook for their living standards that the Budget numbers set out.
“Families are now projected to be in the early stages of the longest period of continuous falls in disposable incomes in over 60 years – longer even than that following the financial crisis.”
Real household disposable incomes are set to fall for an unprecedented 19 successive quarters between 2015 and 2020, according to the foundation.
The report also criticised the government’s announcement that stamp duty would be abolished for first time buyers on houses up to £300,000, suggesting that the £3 billion cost of the measure could have supported the building of 40,000 social rented properties or 140,000 homes through the Housing Infrastructure Fund.
The foundation’s analysis shows that the policy is set to cost £160,000 for every new homeowner created, which would have been sufficient to buy people typically priced properties in over a quarter of English and Welsh local authorities.
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.”
Budget will hit poorer households harder in long-term
Analysis from the Treasury shows that the budget will have a harder long-term impact on the poorest households the most, through changes to tax, welfare and public spending.
The government’s own household impact assessment documents show that those in the bottom income brackets will be affected the most by policy changes, as well as those at the very top. Both groups will lose nearly 2% of their net incomes by 2019/20.
Labour leader Jeremy Corbyn told HuffPost that Hammond was “revising people’s wages and living standards down.”
He said: “The poorest tenth of households will lose about 10% of their income by 2022, while the richest will lose just 1%.
“So much for ‘tackling burning injustices’. This government is tossing fuel on the fire.”
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