Philip Hammond’s budget announced that British workers should anticipate many years of austerity and an extraordinary loss of earnings growth for two decades due to a marked slowdown in the economy, according to warnings by Britain’s leading financial thinktank.
The Institute of Fiscal Studies predicted that Britain’s public finances would remain very low even by the middle of the next decade and “pretty grim reading” was made by the forecasts in slashing productivity, earnings and growth in every year until 2022 according to the traditional post-budget analysis that forecasts.
The chancellor’s claims were undermined by the gloomy IFS report according to the opposition parties, building of a country “fit for the future” was the aim of designing of the reforms and the announced investments by the chancellor, the Treasury said.
Living standards would be harmed, easing pressure on welfare projects and public services would get limited for Hammond, and deficit reduction would be delayed by the decision of reduction of its growth forecasts by one-quarter during the next five years by OBR, said Paul Johnson, the IFS director.
“We are in danger of losing not just one but getting on for two decades of earnings growth,” he said. “We will all have to get used to the idea that steadily rising living standards may be a thing of the increasingly distant past.”
Johnson said that there has been chocking off of the promising recovery in earnings, that have seen growth since 2014 till about the first half of 2016. “That they might still be below their 2008 level in 2022 as the OBR forecasts is truly astonishing. Let’s hope this forecast turns out to be too pessimistic,” he added.
The IFS analysis “exposed the appalling failure of seven years of this government’s austerity economics and its grim consequences for working people”, John McDonnell said.
“Seven years of austerity has not only blighted lives and plunged our public services into crisis, it has also trashed productivity growth and dragged down living standards,” the shadow chancellor said.
“This is a government and an economic policy that has completely failed by any conventional standard; they can serve no further purpose in office.”
The primary austerity plans of the government are still in place even though extra cash has been allocated for the NHS, Johnson said.
“This is not the end of austerity. It is not even nearly the end of austerity. There are still nearly £12bn of welfare cuts to work through the system, while day-to-day public services spending is still due to be 3.6% lower in 2022-23 than it is today,” he said.
The former permanent secretary to the Treasury, Nick Macpherson, said: “There are some perfectly sensible policies in this budget. The sad thing is they will have very little impact because they are so small.
“It’s a perfectly reasonable political choice – you’ve got to fill up a budget speech, and there’s always that choice between one big measure and spreading your largesse rather more thinly, and that is what the chancellor has done. It makes perfect sense in political terms, perhaps less sense in economic terms.”
(Adapted from The Guardian)