Theresa May has been accused of failing to deliver on her promise to help families that are “just about managing”, as experts warn these groups will be hit hardest by a decade-long squeeze on incomes.
Weighing in on revised forecasts for slower growth, influential think tanks have claimed that many workers face the “dreadful” prospect of more than 10 years without a real-term increase in their earnings.
They also warn that low-income households will feel the impact of higher inflation rates and the Government’s freeze on welfare.
This is despite a series of announcements in this week’s Autumn Statement framed as offering helping hand to “ordinary” families.
Presenting its verdict on Wednesday’s mini-budget, the Institute for Fiscal Studies suggested the UK is in line for “an additional dollop of austerity” into the 2020s.
Director Paul Johnson said forecast from the Office for Budget Responsibility (OBR) indicates real wages will remain below pre-recession levels until 2021 – the longest period since the Second World War.
“One cannot stress enough how dreadful that is – more than a decade without real earnings growth,” he said.
“The outlook for living standards has deteriorated rather sharply since March.”
Mr Johnson was also critical of the Chancellor’s plans to increase tax on insurance premiums from 10 to 12 per cent, describing it as a “fiscal infelicity”.
And he questioned the decision to freeze fuel duty, warning that the way in which increases have been repeatedly deferred was “turning into a really big problem for the Treasury”.
On changes to the taper rate for universal credit, he said it marked “a small increase in generosity” compared to the cuts announced last year.
He said that “given the choice between jam today in the form of more money in people’s pockets and jam tomorrow [the Chancellor] went for jam tomorrow.”
The Resolution Foundation offered an equally damning verdict on the Statement, suggesting that targeted measures to support those who are “just about managing” (Jams) will be wiped out by higher inflation and a benefits freeze.
It also pointed out that average earnings are now forecast to be £830 a year lower than expected in 2020, putting the decade on course to be the weakest one for wage growth since the 1900s.
Director Torsten Bell said tackling this renewed income squeeze will be a key challenge for the Chancellor and Government in the months and years ahead.
“The combination of lower growth, higher inflation and the Government’s decision to press ahead with big welfare cuts, means that households risk experiencing even slower income growth in this parliament than they saw in the aftermath of the financial crisis,” she said.
“But unlike the last parliament, it will be low and middle income households who feel the tightest squeeze this time round.”
MPs from within the Government’s own party have also expressed disappointment at the Chancellor’s offerings.
There is a sense that many of the announcements do not go far enough to have a material impact on people’s lives, given the anticipated impact of Brexit.
This is the view shared by the conservative think tank Bright Blue, which referred to the Statement as a “missed opportunity”.
Director Ryan Shorthouse said: “There were some welcome policies [but] the package doesn’t go far enough in matching the rhetoric of Theresa May’s Government to better support those on modest incomes”.
However, Eurosceptic MPs have aimed their criticism at the OBR for being overly pessimistic about the likely cost of leaving the EU.
Former Work and Pensions Secretary Iain Duncan Smith hit out at the organisation’s “utter doom and gloom” predictions, adding that it had “been wrong in every single forecast they’ve made so far”.
Meanwhile, the Labour MP Gisela Stuart suggested its predictions around loss of investment and trade “do not seem credible”.
“Outside of the EU’s single market we can look forward to an even stronger economy,” she said.