The Institute for Fiscal Studies (IFS) have issued a gloomy warning for the future of the UK economy in the wake of Jeremy Hunt’s Autumn Statement.
Director of the IFS Paul Johnson says the forecast of high borrowing, high debt and high tax provides a “grim” outlook for Britain as the Chancellor “errs on the side of caution” in terms of protecting spending and the economy in the short term.
The Autumn Statement has been met with criticism by many, including Tory MPs, with Jacob Rees-Mogg being among those to criticise the £25 billion of tax rises unveiled.
Brits will have to deal with financial hardships for years to come, warns the IFS. Yui Mok
The Chancellor argued that there is “nothing conservative about ducking difficult decisions” and his package is designed to “make sure we sort out the economy”.
The IFS warned that the biggest drop in living standards will “hit everyone” and “middle England is set for a shock” as wages fall, but taxes surge.
The economic think tank’s director also warns that the changes are here to stay for “several decades” as Brits become accustomed to “higher taxes and a bigger state”.
Mr Johnson stated that the drop in living standards is the “biggest fall in living memory” and comes “off the back of very poor income growth for many years”.
“This will hit everyone. But perhaps it will be those on middling sorts of incomes who feel the biggest hit,” he said.
“They won’t benefit from the targeted support to those on means-tested benefits. Their wages are failing and their taxes are rising. Middle England is set for a shock.”
Mr Johnson said the Government is “reaping the costs of a long-term failure to grow the economy”, the effects of an ageing population and high levels of borrowing in the past.
Jeremy Hunt's measures will "hit everyone" according to the IFU's Paul Johnson. House of Commons
The economic plans provide a stark contrast to the mini budget put forward by Liz Truss’s Government which caused economic turmoil.
The IFS director stated: “The truth is we just got a lot poorer. We are in for a long, hard, unpleasant journey; a journey that has been made more arduous than it might have been by a series of economic own goals.
“Mr Hunt appears to have recognised this.
“After years of cakeism, his colleagues, the opposition and we the voters need to take that on board too.”
Independent analysts said Mr Hunt’s promised £30 billion of spending cuts would mean a prolonged squeeze on public sector pay despite a growing clamour in many services for real-terms increases after the years of austerity.
The Resolution Foundation said the cuts are “likely to be undeliverable” as they would require “years of holding down public sector wages below those in the private sector”.
Economists at the think tank said the plans pile further pressure on those in the “squeezed middle”, who face a permanent 3.7 percent income hit, which is bigger than the very richest.
They said that wages would be £15,000 higher if they had continued to grow at their pre-financial crisis rate rather than face “this unprecedented 19-year pay downturn”.
Mr Hunt denied his plans are a raid on workers, telling BBC’s Today: “No, it’s a plan that gets us through very difficult times that are being faced by other countries all over the world and it gives people certainty.
“It’s not possible to raise £25 billion of taxes just focusing on a very small group of very rich people.”