While the Chancellor pats himself on the back, working people are paying the price for the prime minister’s disastrous mishandling of Brexit.
Jobs are being lost, plants are under threat and much-needed investment is being cancelled.
Here’s what we learnt about where the economy is forecast to be heading from today’s statement, and the analysis that the Office for Budget Responsibility (OBR) published alongside it.
We know that the first thing the government must to do to clean up this mess is to take no-deal off the table and seek an extension of Article 50. We need a deal that puts jobs, rights and peace in Northern Ireland first.
We need a financial settlement that supports industry and ends austerity once and for all. As our analysis below sets out, working people can’t wait.
Pay won’t recover for another 4 years – and it’s the rich who are seeing the fastest pay rises
During his Spring Statement, Philip Hammond bragged that real wage growth would be positive in each of the years forecast by the OBR. He’s right, but it’s a sign of very low expectations that any positive real wage growth is seen as good news now.
In real terms, wages are expected to gradually grow over the next five years. In 2023, we’re expected to finally return to pre-crisis real wage levels. By then, we’ll have had 15 years of lost real wages.
What’s more, we know that the pay rises we’re seeing are mostly benefiting those at the top. The OBR picked up on this in their analysis: data from HMRC’s ‘real time information’ system shows that for the top 0.1 per cent of earners, pay rose by 5.9 per cent on a year earner (before inflation), compared to the average rise of 3.7 per cent (on this measure).
The Chancellor announced a welcome review of the evidence on the Minimum Wage, and the case for a more ambitious target – pushing beyond the 60 per cent target for median earnings set for 2020. But while tackling low pay is part of the solution, there was nothing on the trade union rights we need to boost pay for everyone.
Economic performance in 2019 will be the weakest since the global financial crisis.
The immediate outlook for the UK economy is poor as Brexit uncertainty, government cuts and slowing global growth continue to take a toll.
The OBR lowered its forecast for UK economic growth this year from 1.6 per cent to 1.2 per cent, but left its 2020 prediction unchanged at 1.4 per cent. It has raised forecasts slightly for 2021 and 2022 and left its 2023 forecast unaltered.
The revised forecast means economic performance in 2019 will be the weakest since the recession caused by the global financial crisis.
And over the five-year forecast, growth is predicted to remain at around half the pre-crisis average of 3 per cent (the dotted line on the chart below).
This is despite the OBR taking a considerably more optimistic view than the OECD, which earlier this month cut its forecast for 2019 and 2020 to 0.8 per cent and 0.9 per cent – lower than all other major economies apart from Japan.
The government has done nothing to repair our public services
Philip Hammond said that if the government managed to get a Brexit deal through parliament, he’d conduct a spending review that could boost public services. But he did nothing to help our public services that are crying out for more funding.
The TUC have urged the government to find an extra £25bn – £15bn for departmental spending and £10bn for public investment - to provide material support for the economy restoring the health of the public sector.
But the total impact of measures announced today amounts to an extra £2.2bn in departmental spending. Plans for government investment in 2019-20 remain virtually unchanged – down slightly from £61.8bn to £61.7bn.
There’s no relief for families facing working poverty today
The freeze on working-age benefits – which means tax credits and universal credit don’t go up with inflation – has pushed 200,000 people into poverty, around half of them children, according to the Joseph Rowntree Foundation.
The chancellor chose to ignore this continuing hardship today. Data on the number of households in working poverty, published on the 28th March, is likely to see those figures rise even higher. Nothing in today’s statement will help those families struggling to get by.
Households are being pushed further into debt
The OBR forecast shows that both the ratio of household debt to income and the ratio of unsecured debt to disposable income are expected to rise over the next years. The OBR notes that unsecured debt does include student loan debt, which is expected to rise strongly, and accounts for “most of the rise”. Even taking this into consideration, however, there’s clearly a cause for concern.
As we’ve shown recently, unsecured debt per household is currently at a record high, even if we remove student loan debt. We need to be seeing drops in the ratio of unsecured debt to disposable income, not steady rises.
This adds to a concerning outlook for households. The household saving ratio has been at a staggeringly low level for almost a couple of years now, and this is expected to stay the same until at least 2024, when the forecast ends.
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