- Published
People are facing a "painful" and "depressing" few years ahead, economic think tanks have warned, after forecasts showed growth in living standards grinding almost to a halt.
Typical working-age households would see their disposable income fall by £1,050, or 3%, between now and 2029, according to the Resolution Foundation, while the Institute for Fiscal Studies (IFS) said the current decade would be the worst for household income growth on record.
Chancellor John Healey said his Budget offered "breathing space", but said the government could "never remove completely" cost of living pressures.
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government → publish → pressures
The UK's official forecaster said its latest economic forecast painted a "pretty grim picture".
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forecast → say → picture
The Office for Budget Responsibility (OBR), blamed the difficult financial situation facing the UK on higher borrowing costs and inflation caused by the US-Iran war.
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Office → blame → war
In response to rising energy prices, Healey has announced measures, including a £100 support payment, aimed at easing pressure on household finances.
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Healey → rise → finances
But that would not be enough to offset the impact of higher energy bills, the Resolution Foundation said.
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Foundation → offset → bills
"This parliament is increasingly looking like one of two halves," said the think tank's chief executive, Ruth Curtice.
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executive → look → halves
"The first half has been marked by rising living standards, solid economic growth and extra funding for public services," she said.
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she → mark → services
However, the second half of the parliament would be "tough going", she said.
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she → go → parliament
In response the government had provided a "scattergun" Budget that did not do enough to address the challenges facing the country, Curtice said.
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Curtice → provide → country
Over the course of this parliament, incomes for non-pensioner households, after taxes, benefits, and housing costs are taken into account, will have risen by "a paltry" £600, the Resolution Foundation said, with the gains made in the first five years.
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Foundation → take → years
Even after the extra support provided by the government, households will be left paying higher energy bills than during the last energy crisis in 2022, according to its analysis.
The Resolution Foundation said the support should have been more targeted at the poorest households.
Lost decade
Alongside the Budget the OBR issued its economic forecast indicating a slowdown in GDP growth from 1.2% in 2026 to 1% in 2027.
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OBR → provide → 2027
The forecast for next year is sharply lower than what was predicted at their last assessment in March.
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what → predict → March
The OBR also put its forecast for inflation for 2027 up from 2% to 3.4%.
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OBR → put → %
Frozen tax thresholds are also eating into people's take-home pay.
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thresholds → eat → pay
However, the OBR also emphasised the difficulties in economic forecasting, highlighting uncertainty over the future path of inflation, in particular, which could turn out to be either significantly higher or lower than their predictions.
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which → emphasise → predictions
While the Resolution Foundation focused its forecast for living standards on working age households, the OBR looks at all households, including pensioners and reflects a 10-year rolling average growth to take into account short-term fluctuations.
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OBR → focus → fluctuations
The OBR found that by the end of the decade living standards for all households would have barely grown, by less than 0.1% per year.
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standards → find → year
"This decade looks set to be the worst decade for growth in household incomes on record," added the Institute for Fiscal Studies (IFS).
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Institute → set → Studies
"No amount of temporary cost of living packages will fix that.
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amount → fix → that
We need a stronger economy."
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We → need → economy
'Fragile' finances
IFS director Helen Miller said there would also be growing pressure on the government's spending plans over the parliament.
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Miller → say → parliament
"Spending plans look extremely tight.
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plans → look → ?
They don't look to me like plans that this government would want to deliver," she said.
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she → look → that
"Whether or not they are delivered matters because the spending plans underpin the plan to bring down borrowing," she added.
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she → deliver → borrowing
Miller said she was left with the impression that Healey was hoping the economy would improve to take the pressure off those spending decisions.
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economy → say → decisions
Healey, speaking on the BBC's Today Programme, said "economic storms", including the Iran war and Russia's invasion of Ukraine, were affecting countries around the world and the government was seeking to help where it could.
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it → speak → world
He said energy bill help would create "breathing space" for most households.
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help → say → households
Around 20 million households are set to receive the £100 payment based on which council tax band they are in.
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they → set → band
But Conservative shadow chancellor Andrew Griffith said the Budget had left the public finances "more fragile" as Healey had reduced the "headroom" of the amount of buffer the country has between what it takes in revenues and what it spends.
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it → say → what
Liberal Democrat leader Ed Davey said the £100 energy payment would be identified as the best item in the Budget for many people, but said that it was "not good enough" when you considered the "stealth tax rises" that were taking money out of people's pay packets.
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that → say → packets
The Aporia
