Households face 'lost decade' of falling living standards as grim Budget forecasts slash size of the UK economy by £65bn

British households are staring at at least a decade of falling spending power and living standards according two think-tanks' analysis of the drastic downgrades to economic growth forecasts in yesterday's Budget.

The Office for Budget Responsibility's cuts to this year's expected growth rate and to the outlook for the next four years mean that the UK economy will take a £65billion hit by the end of 2021.

In a bleak assessment of the consequences,  the Institute for Fiscal studies has warned that workers are facing two 'lost decades' without earnings growth - with average earnings in 2021 set to be nearly £1,400 lower than forecast in March 2016, and lower in real terms than at the time of the financial crash in 2008. 

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Spending squeeze: British workers face an 'unprecedented' fall in disposable income, the Resolution Foundation has warned.

The findings echo a separate report from the Resolution Foundation today, which suggested the hit to the economy would be £45billion and that real household disposable incomes are set to fall for 19 successive quarters between 2015 and 2020.

Despite a £25billion giveaway, the Budget did not mark the end of the 'age of austerity', said the IFS, pointing out that public services outside the NHS still face 7 per cent cuts in day-to-day spending over the next five years.

The 'grim' official forecasts from the OBR imply that GDP per head will be 3.5 per cent lower in 2021 than was forecast less than two years ago, equating to a £65billion hit to the economy, said IFS director Paul Johnson.

'We are in danger of losing not just one but getting on for two decades of earnings growth,' said Mr Johnson. 

Meanwhile, Resolution Foundation said the 'unprecedented' squeeze will leave households an average of £540 worse-off by 2023 than forecast in March and pay rates will not return to levels seen before the financial crash until the middle of the next decade.

'The poorest third of households are set for an average loss of £715 a year by the end of the parliament, while the richest third gain an average of £185,' the report claimed.

It said the UK faced a 17-year downturn before wages return to 2008 levels.

The OBR slashed its growth forecast for this year from 2 per cent in March to 1.5 per cent. It added that economic growth will average out at a little over 1.4 per cent a year from 2018 to 2022.

That will have a knock-on effect on the public finances with Government borrowing set to be far higher than anticipated.

But the bleak outlook contrasted with actual data on the economy released today that showed household spending holding up well in the third quarter.

The Office for National Statistics confirmed gross domestic product grew by 0.4 per cent between July and September, rising from 0.3 per cent for the first and second quarters.

HOW MUCH WILL YOU SAVE AFTER TAX AND NATIONAL INSURANCE CHANGE 

Annual salary	Monthly gain	Annual gain
£12,000 to £45,000	£8.42	£101.04
£46,000.00	£16.75	£201
£47,000 to £123,000	£19.67	£236.04
£124,000 up	£8	£96
Source: This is Money using Deloitte tax calculator from Autumn Budget 2017. Savings from April 2018

Consumer spending proved resilient, bouncing back to 0.6 per cent from 0.2 per cent in the second quarter despite the persistent squeeze on household finances from higher inflation and dismal wage growth.

The resurgent performance was driven by new car sales, which had slumped between April and June after people forked out money in the first three months of the year to escape tax changes on high-polluting vehicles.

Paul Falvey, tax partner at BDO said that part of the reason for the growth forecast being revised down in the Autumn Budget was that 'productivity in the UK remains low and without a higher productivity the country can’t achieve growth'. 

'The lack of investment in technology and infrastructure in the past few years is now having an impact on the public finances,' he added. 'This restricts the Chancellor’s ability to invest in public service and will have a lasting impact on all households over the next few years.'

The Resolution report said that the poorest households would be the hardest hit 'despite welcome but relatively small shifts on Universal Credit, tax and benefit policies announced since [the] Summer Budget 2015.

'The poorest third of households are set for an average loss of £715 a year by the end of the parliament, while the richest third gain an average of £185,' it warned.

The Budget's economic gloom was cushioned for higher-rate taxpayers by a small giveaway. 

Higher rate taxpayers earning £50,000 a year will get a £236 boost to take-home pay next year thanks to threshold changes that will cut their tax bill but raise national insurance contributions.

Meanwhile those earning £30,000 will benefit to the tune of £101.  

As for Chancellor Philip Hammond's stamp duty cuts and housing initiatives, the report suggested the money could have been spent differently.

'The cumulative £3bn cost of the abolition of stamp duty for many first time buyers could have supported the building of 40,000 social rented properties or around 140,000 homes through the government’s own Housing Infrastructure Fund,' it argued.

'The policy is set to cost £160,000 for every additional home owner created, sufficient for the Chancellor to have instead simply given people typically priced properties in over a quarter of local authorities in England and Wales.'

Read more: http://www.thisismoney.co.uk/money/news/article-5110683/Households-face-five-years-falling-disposable-incomes.html#ixzz4zIY4sy4q
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NWN:  This was all foreseen in a book that was widely read by nationalists in the UK in the late 1970's called VODKA COLA by Charles Levinson. In it he argued , and this was well before the collapse of communism. That living standards would be reduced here in the west. But conditions would slightly improve in the eastern bloc. 

Also, this is one of the reasons why these capitalists like cheap labour. Apparently just today, the Daily Mail said we were getting an immigrant every 38 seconds coming into the UK. Now THAT is unsustainable.