‘Squeezed middle’ misery: Brits face TWO DECADES of wage slowdown

Jeremy Hunt today insisted ministers are doing “everything” to help families with the impending fall in living standards following the brutal £24bn tax attack.

In a round of interviews the morning after his extraordinary autumn statement, the chancellor said he needed to be “honest” about the “challenging” situation facing the country.

But he claims people are voting for the Tory government because they make “difficult” decisions. “None of this is easy, but it’s the right thing to do,” he told Sky News.

Mr Hunt yesterday unveiled a desperate package to stabilize the public finances, sending tax receipts above £1 trillion this year and putting the burden on course to be the highest since World War Two.

But conservatives accused him of taking the “easy” option of cutting taxes instead of focusing on curbing spending. And although the chancellor said he shared the pain, analysis by the Resolution Foundation think tank warned he was putting pressure on a “pressured environment”.

It says that in real terms wages are now not expected to return to 2008 levels until 2027 – meaning two “lost decades” when living standards have not improved. If wages had continued to grow at pre-credit crunch rates, they would have been £15,000 higher by the end of the period.

The announced personal tax increases are expected to take a permanent 3.7 percent hit to the income of the typical household, according to the analysis.

Under the measures announced yesterday, all workers face paying more tax as the freeze on personal allowances, the basic and higher thresholds is extended until 2028, dragging people deeper into the system “invisibly”. As a result, 3.2 million people will be liable for tax for the first time and a further 2.6 million at the higher rate after five years.

Mr Hunt tried to show the rich were being ripped off too, cutting the level at which the top rate is due by 45p from £150,000 to £125,000 to catch a further 250,000 people.

Subsidies on energy bills are being cut to save money, with the average household bill rising from £2,500 to £3,000 from April. Mr Hunt claimed the energy crisis was “made in Russia”.

Town halls will be free to increase council tax by up to 5 percent without the need for a referendum.

As the fallout from the Autumn Statement continues today:

• Retail sales failed to fully bounce back in October after falling the previous month amid the Queen’s funeral;
• The Tories are demanding assurances from Mr Hunt that fuel duty will not rise in March after the OBR plans a 12p rise in petrol and diesel prices to raise billions of pounds;
• Details from the OBR reveal that the number of people claiming sickness benefits is expected to rise by one million, costing £7.5bn, with fears of the impact of the ‘Long Covid’.

Mr Hunt said today that his fiscal plans would help the country get back to “even”, but admitted it would be “challenging”.

“For the next two years, it’s going to be a challenge,” he said.

“But I think people want a government that takes tough decisions, has a plan that will bring inflation down, stop these big price rises in energy bills and the weekly shopping spree, and at the same time take action to get through this tough period.’

Mr Hunt also hit back at Tory critics after former cabinet minister Jacob Rees-Mogg accused him of taking the “easy” way out of the crisis by raising taxes instead of focusing on government spending.

The chancellor said: “What I would say to my fellow Conservatives is that there is nothing conservative about spending money you don’t have, there is nothing conservative about not tackling inflation, there is nothing conservative about avoiding hard decisions , which expose the economy song.

“And we’ve done all those things and so it’s a very conservative package to make sure we get the economy in order.

“None of this is easy, but it’s the right thing to do.”

Mr Hunt insisted he was “not to blame” for curbing tough decisions by delaying around £30bn of spending cuts until the next general election.

“I mean you can accuse me of a lot of omissions, but looking at the front pages of the papers today, to say we’ve shied away from any of the tough decisions facing the British economy is the only accusation we’re not guilty,” he told BBC Breakfast.

The gloomy backdrop to the autumn statement was the OBR watchdog’s forecast that the economy was already in recession and would contract by 1.4% next year.

This year and next is expected to see the worst decline in living standards since records began in 1956, erasing eight years of progress with unemployment jumping from 1.2 million to 1.7 million.

The tax burden will rise from 33.1 percent of GDP in 2019-20 to 37.1 percent in 2027-28 – a percentage point higher than the March forecast and its “highest sustained level since the Second world war here’.

Tax receipts are expected to reach £1 trillion for the first time this year, not next year as expected, largely because of the windfall tax.

Analysis of the Treasury allocation shows that by next year all single-adult households earning over £25,000 will be worse off under the measures announced today, while for families of four the figure is £59,000.

in his statement from the House of Commons yesterday, Mr Hunt said taking “tough decisions” would mean a “shallower recession”.

But he immediately faced questions about his plans as it became clear that the bulk of the £24bn tax rises and £30bn spending cuts would not be felt until the next election, expected in 2024.

Spending will actually increase by £9.5 billion in 2023-24, while only £7.4 billion extra will be raised in taxes.

Among the few positive news from the statement, state pensions and benefits will be increased in April in line with inflation of 10.1 per cent since September.

A windfall tax on energy firms will be increased to 35 per cent and remain in place until 2028. Together with a 40 per cent tax on profits from older renewable and nuclear power generation, this will raise £14bn next year.

Mr Hunt said foreign aid would now not return to 0.7 per cent of national income as planned, instead remaining at 0.5 per cent for as long as the “fiscal situation permitted” – potentially for the next five years.

In a blow to the property market, the chancellor said previously announced stamp duty cuts would be scrapped in 2025. House prices are expected to fall by 9 per cent by the summer of 2024 as mortgage rates move higher .

In another change that could spark a backlash, electric cars will be charged road tax for the first time.

While NHS budgets will be protected, other departments face a grim new bout of austerity – albeit mostly delayed. The OBR has suggested that defense spending will remain at 2 per cent of GDP from 2024, rather than rising to 3 per cent as Defense Secretary Ben Wallace has pushed for.

The delicate balance sheet allowed Mr Hunt to claim the debt would fall as a share of GDP in five years.

It also boasted that overall spending would be higher – but the OBR pointed out that the rise from 39.3 per cent of GDP in 2019-20 to 43.4 per cent in 2027-28 was only due to -high interest rates on debt and welfare spending and the “energy-shock-driven smaller economy.”

In stark contrast to the fallout from Liz Truss’s mini-budget, markets remained calm as they digested the package. The business said it was “providing stability” but had “more to do” for growth.

The Tories are already expressing anger at the scale of the measures, with Conservative veteran Richard Drax warning that tax rises on businesses and working people risk “stifling” growth and productivity.

Former cabinet minister Esther McVey threatened rebellion and others raised the alarm that Mr Hunt was “throwing the baby out with the bathwater”.

The bright backdrop to the autumn statement was new forecasts from the OBR watchdog showing that the UK is already in recession.

He also made new forecasts for inflation, which jumped to a 41-year high of 11.1 percent.

The OBR said CPI had peaked and would average 9.1% this year and 7.4% next year.