News
Raymond Doherty 14 Mar 2019 05:03pm

Spring Statement: UK’s richest getting wealthier fastest

Pay for Britain’s highest earners is rising faster than the rest of the country’s workforce, according to the Institute for Fiscal Studies

The government’s current freeze on benefits, now in its fourth year, has cost 10 million UK families an average of £420 a year.

In addition, weak earnings growth and strong employment growth mean that the large majority of households in poverty now have someone in paid work but still have to rely on tax credits and or benefits because they don’t earn enough, the IFS said in its post- Spring Statement analysis.

Chancellor Philip Hammond yesterday announced a sharp cut to UK economic growth forecasts over the next few years and warned that a no-deal Brexit would deliver a significant short-to-medium term hit to the UK economy, increase unemployment, and increase prices in shops.

This year, according to the Office For Budget Responsibility (OBR), UK economic growth will fall to 1.2% – down from its previous prediction of 1.6%. Over the next few years the OBR predicts, 1.4% (2020), 1.6% (2021), 1.6% (2022), 1.6% (2023).

The borrowing figures were more positive for the chancellor. Looking forward, borrowing will fall from £29.3bn in 2019-20, then £21.2bn, £17.6bn, £14.4bn and finally £13.5bn in 2023-24 – its lowest level in 22 years," he said.

On the upside, the public finances were again healthier than expected, according to IFS director Paul Johnson.

“Borrowing is set to come in at just £23bn this year. At 1.1% of GDP that’s its lowest level since 2001-02. It is £14bn less than forecast just a year ago. On current forecasts, it will remain low, and within the chancellor’s fiscal target of a deficit below 2% of national income in 2020-21, for the next few years,” said Johnson.

He said that one of the costs of a “combination of the obsessive focus on Brexit and the lack of parliamentary majority” has been the lack of focus on some other major challenges. One of which is the tax system.

“There is the ongoing worry over the taxation of multinationals and digital companies; there is the growing numbers of owner managers and the self employed, who pay less tax than equivalent employees; the continued failure to maintain the real value of fuel duties. And perhaps equally worrying is the apparent presumption in some quarters that if we do want more revenue it can all come from the rich and from companies. It can’t. That’s not how other countries do it.”

If a Brexit withdrawal agreement is struck, Hammond said he would launch a full three-year Spending Review before the summer recess, to be concluded alongside an Autumn Budget. The IFS said the parameters of this would finally decide whether austerity is really going to end.

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