Chancellor Rejects Analysis Predicting Drop in Living Standards
The chancellor has dismissed new analysis suggesting the average family could be £1,400 a year worse off by the end of the decade. The report, conducted by the Joseph Rowntree Foundation (JRF), cites frozen tax thresholds, rising mortgage and rent costs, and declining real earnings as key factors contributing to the predicted drop in living standards across Britain.
Poorest Households Hit Hardest
According to the JRF, the poorest third of households are expected to see their living standards fall twice as much as middle and high earners. The charity warns that the government is likely to miss its stated goal of raising living standards across the UK before the next general election.
The analysis projects a £1,400 reduction in disposable income for the average family by April 2030, representing a 3% fall. For the lowest-income households, the situation is even more dire, with an anticipated annual loss of £900 — a 6% decrease in disposable income. These figures do not account for the recently announced £5bn in cuts to disability benefits, which could further worsen conditions for vulnerable groups.
Projected Earnings Decline
The JRF also predicts that average earnings will fall by £700 per year by the end of the decade. Despite these findings, the chancellor remains optimistic about future living standards.
Chancellor's Response: ‘Confident in Improvement’
In an interview with Trevor Phillips, the chancellor rejected the JRF’s analysis, asserting that living standards during the last parliament were at their lowest on record. However, she highlighted that the independent Office for Budget Responsibility (OBR) forecasted a rise in living standards, with wages currently growing at twice the rate of inflation.
“I'm confident that we will see living standards increase during the course of this parliament,” the chancellor said. She further noted that a “sustained increase” has been observed since Labour's election victory.
While acknowledging the need for continued efforts to boost living standards, she defended the government’s early actions, stating, “This government has already got started in delivering our plan for change.”
JRF Calls for Policy Change
The JRF, however, has strongly criticized the government’s welfare cuts, calling them “wrong” and counterproductive. The charity urges the government to reverse the planned cuts and introduce a new "minimum floor" for Universal Credit to mitigate hardship.
Instead of reducing benefits, the JRF advocates for raising taxes on wealth and investments to generate additional revenue.
Spring Statement Approaches
The chancellor’s comments come just days before the spring statement, where further cuts are anticipated. The government is expected to announce £2bn in reductions to the civil service in an effort to balance the country's finances. However, the chancellor has assured the public that frontline services will remain unaffected.
In a separate interview with The Sun On Sunday, she confirmed that no new tax increases would be announced in the upcoming statement.
Analysis Methodology
The JRF's predictions are based on modeling conducted using forecasts from the Bank of England and other economic institutions. The charity, known for its work in poverty reduction research, continues to warn that without policy changes, the government’s target of improving living standards will remain out of reach.
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