Autumn statement: family incomes set to slump as spending cuts lie ahead, warns IPPR
Chancellor has taken ‘important steps towards fairer taxation’ by cutting allowances on capital gains and dividend income
But with real household disposable income to fall by 7 per cent over next two years, more support for poorest families is needed
Today's policy announcements imply deep spending cuts and fail to tackle poor prospects for growth, IPPR says
IPPR experts have reacted to key aspects of today’s autumn statement.
Carys Roberts, executive director at IPPR, said:
“The big story today is of an economic outlook that makes grim reading for families up and down the country. Disposable income in real terms is falling 7 per cent over the next two years, taking the average family back to 2013.
“In that context, the Chancellor’s task was to set out a clear plan to support families and public services facing soaring costs, and to invest to get the economy back on track. Doing so is vital for credibility on the public finances.
“The good news is that there won’t be cuts as deep as some have demanded in the short term, and he made important steps towards fairer taxation through the reduction in allowances on capital gains and dividend income taxation. IPPR has long argued for these as part of broader reforms to equalise taxes on income from work and wealth.
“But the bad news is that sticking to spending review plans implies some departments will see their budgets fall significantly below the spending review's trajectory, in real terms in the next two years, and the government has scheduled deep cuts for future years. These decisions will hugely exacerbate the challenges faced by departments still reeling from austerity.
“The Chancellor has also left on the table more ambitious tax reforms like equalising tax rates on income from work and wealth, that could have funded investment that our public services so desperately need and stronger support for family incomes. Furthermore, his new fiscal rules will constrain investment spending in future and risk hamstringing growth and net zero plans.
“The spending cuts set out today are not necessary. The Chancellor could have chosen to invest in the people and services that make up the economy, and taxed the wealthiest to stabilise the finances. This budget will be cold comfort to all of us who rely on services and those who are feeling the squeeze on incomes.”
Dr George Dibb, head of the Centre for Economic Justice at IPPR, said:
“The Chancellor was keen to dub today’s package as a ‘Plan for Growth’ but the OBR forecasts show another half decade of economic stagnation ahead. The UK is the only G7 country yet to surpass our pre-pandemic peak. The OBR now expects that not to happen until late-2024 representing four more years without growth, further hitting wages and investment.
“These poor prospects for growth aren’t improved at all by today’s policy announcements. Without a more dynamic and growing economy, not only will we not be able to raise prosperity, the fiscal situation only grows more dire. Poor growth forces more cuts in a ‘doom loop’ that we have to break out of.”
Rachel Statham, associate director for work and the welfare state at IPPR, said:
“Uprating benefits in line with inflation is a welcome step and will begin to plug the gap in families’ budgets next year. But the government is playing catch up, having failed to raise the value of payments as prices soared over the last 12 months.
“Emergency support next year is much needed, but the ad hoc payments announced today ignore the reality that higher prices are here to stay. Families need support they can rely on to plan for the future.
“People in receipt of means-tested benefits will receive a flat £900 payment, but this fails to recognise that larger families are facing much higher costs. Meanwhile housing support will remain frozen for people in the private rented sector while rents are expected to skyrocket.
“We need a serious plan to address the living standards crisis across the UK – but today’s budget fell short.”