Budget 2017: Plummeting growth means 'longest fall in living standards for 60 years'
Britain is on course for the longest fall in living standards since records began 60 years ago, experts warned today in the wake of Philip Hammond’s Autumn Budget.
Treasury analysts handed the Chancellor the “mother of all economic downgrades” when they revealed plummeting growth figures yesterday, the Resolution Foundation said.
And the left-leaning thinktank slammed Mr Hammond’s flagship housing policy of cutting stamp duty for most first-time buyers as “a very poor way to boost home ownership”.
In a major blow for the Chancellor, the independent Office for Budget Responsibility (OBR) slashed the growth forecast this year from 2% to 1.5% because of sluggish productivity and downgraded projections for the next few years.
It means borrowing is set to be £30bn higher in 2022 than previously thought - hammering Mr Hammond's hopes of reaching a Budget surplus during the next parliament.
In a new report, the Resolution Foundation said productivity growth in Britain was the worst since Napoleon invaded Russia in 1812.
It said by 2020, incomes will have fallen in every quarter for almost five years straight - with living standards falling and inequality rising.
According to their analysis the poorest third of households will see an average loss of £715 a year by the end of the current parliament while the richest will gain an average of £185.
And the Foundation said average pay would not return to its 2008 peak until the middle of the next decade - with disposable incomes £540 lower by 2023 than forecast in March.
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...
“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.”
The thinktank was also withering on Mr Hammond’s announcement that first time home buyers will pay no stamp duty on the first £300,000 of any house worth up to £500,000.
It said a more effective use of the cash would have been to buy typically priced houses for people in over a quarter of local authorities in England and Wales.
And it said the cash could have instead been used to build 40,000 social rented properties or 140,000 homes.
Mr Bell concluded: “Yesterday’s stamp duty rabbit is in reality a very poor way to boost home ownership.”
The OBR has already said the policy will only prompt a further 3,500 sales and push up house prices and therefore be better for sellers than buyers.
This morning the Chancellor said of the gloomy growth forecasts: "The challenge for us as a nation is to prove them wrong."
But Shadow Chancellor John McDonnell said Mr Hammond was “cut off from the real lives of people".