All the Bad News Buried in Jeremy Hunt’s Budget
Buried in the Chancellor’s Statement is news the UK will suffer a sustained period of low growth, high taxes and a record-breaking fall in living standards, reports Adam Bienkov
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Jeremy Hunt today claimed that the Government’s economic plan “is on the right track” and had “proven the doubters wrong”.
He claimed that Brexit had allowed the UK to create a “high wage” and high “enterprise” economy.
However, buried in his statement were figures confirming that Britain is set for a prolonged period of low growth, high taxes and declining living standards, that has been made significantly worse by our decision to leave the EU.
Here is all the really bad news the Chancellor refused to tell us about today.
UK Economy to Perform Even Worse Than Russia
Hunt today boasted that the UK economy is now forecast to avoid a technical recession this year, with the Government’s Office for Budget Responsibility forecasting stronger growth this year than previously expected.
However, what Hunt failed to add is that while the OBR’s forecast for this year has now been uprated, their forecast for the years that will follow has actually been downrated. Also absent from his statement was the acknowledgement that, even with these adapted figures, the UK is still set to suffer slower growth this year than any other major economy, including sanctions-hit Russia.
The Biggest Ever Fall in Living Standards
Hunt today claimed to have proven those predicting gloom for the economy wrong. However, today’s OBR report merely confirmed that British people are set for a prolonged period of declining living standards.
According to their new forecast, average households will see their disposable income fall by a further 6% over the coming two years.
This amounts to the biggest fall in living standards since records began in the 1950s.
This fall will also leave living standards at a lower level in real-terms than they were before the start of the pandemic – a worse record than any other major economy.
A Tax Cut for Millionaires
Buried in the Budget was news that Hunt is handing a huge tax cut to pension millionaires.
Hunt’s decision to abolish the pensions lifetime allowance will benefit some of the wealthiest people in the country.
Treasury officials today justified the decision by saying that it is designed to stop doctors from leaving the NHS early.
However, according to Government estimates there are only up 15,000 doctors who could be affected, while the broader policy is expected to have a cost of some £835 million.
Asked why ministers had not simply targeted the measure at NHS workers alone, rather than all wealthier Brits, Treasury sources suggested that this was the “quickest” means of preventing doctors from leaving the profession.
Brexit Is Killing the UK Economy
Hunt today claimed that Brexit was creating a “high wage” and high “enterprise” economy. He also, bizarrely, labeled a plan to freeze duty on beer as a “Brexit Pubs Guarantee”.
However, beyond such attempts at headline-grabbing, today’s OBR report merely confirmed that leaving the EU has had a substantial negative impact on growth, productivity, trade and investment.
According to today’s OBR’s forecast, leaving the EU will actually reduce our productivity by 4%, with imports and exports also reduced by 15%.
And while Brexit was sold as a means to turn Britain into a “global powerhouse”, today’s OBR report notes that “business investment has stagnated since 2016” due in part to “uncertainty surrounding the UK’s future trading relationship with the EU… weighing on investment decisions since then”.
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High Tax Government
Hunt accused the opposition Labour party of being in favour of raising taxes, telling MPs that, “they put taxes up. We cut them”.
However, in reality, today’s OBR merely confirms that the tax burden – the measure of the total tax paid across the economy – is set to rise to its highest level since the Second World War.
And while Hunt today boasted about cutting and freezing some taxes, today’s OBR report confirms that the decision taken by his predecessor to freeze income tax thresholds means that the Government will continue to increase the overall amount it collects in income tax, due to so-called ‘fiscal drag’ pulling more people into higher income tax bands. This alone, will raise an estimated additional £30 billion a year from taxpayers by 2027/28.
The Poor Man of Europe
For all his rhetoric today about “proving the doubters wrong” Jeremy Hunt’s Budget today confirms that the UK is set for a prolonged period of slow growth and declining living standards.
And while the fact that the UK is due to avoid a technical recession this year is welcome, the broader picture is of an economy that has been badly hit by a lost decade of low growth and low wages.
Today’s statement confirms that much of this pain is set to continue for years to come, with the economy still set to be smaller than it was before the start of the pandemic.
With the decision to leave the EU also set to continue holding the UK economy back, the reality is that there was little for the Chancellor and his Government to really boast about in his Budget today.