Autumn Budget: Expert on 'depressing' household income impact
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The long-term impact of the Chancellor’s autumn budget has been branded “utterly depressing” as economists predict a drastic decline in household disposable income. The devastating impact on families across the UK has been spelled out in a daunting graphic which highlights the prospect of fiscal drag. Jeremy Hunt announced the new economic package on Thursday, which included billions in tax rises and spending cuts. In addition, support for spiralling energy bills will be scaled down, just as financial experts warn the country is set to enter a devastating recession.
Sky News data and economics Editor Ed Conway offered his assessment of the Chancellor’s autumn budget.
He reported: “No longer is this the worst year for household disposable income in modern history, it is the worst two years for seeing our household income basically contracting.
“That is frankly utterly depressing – that is one of the most depressing charts I have seen.
“Unfortunately, it was depressing last time – the OBR produced this chart back in March – but it just got a lot more depressing because they have just added an even worse couple of years there.”
In his address to the House of Commons, the Chancellor acknowledged the country was in recession but pledged his budget would rebuild the economy and bring down the startling level of government debt.
The Labour Party was quick to criticise the Conservative budget as Shadow Chancellor Rachel Reeves accused the Tories of “pickpocketing” the public by introducing a freeze on income tax thresholds.
The measure will mean millions of people will gradually pay more in tax as their incomes rise, producing an economic effect known as fiscal drag.
The Shadow Chancellor warned: “Britain can no longer afford a Conservative government.”
Read more: Hunt admits UK already in recession as he unveils new forecast
In his analysis, Mr Conway added: “The backdrop here: partly it is obviously a story about what is going on in Ukraine, partly it’s a story about the fact that we are going through a really difficult time in the UK economy as well. I’m afraid that’s really the big story.
“Alongside all of the fiscal bad news, there’s assessment for the economy that it is going to be one of those recessions that is not like the financial crisis recession.
“It’s not like the recessions we are used to from recent years, it’s a recession that really will hit you in your pocket.
“Our spending power, our disposable income, has just contracted our ability to pay and that is kind of depressing, I’m afraid.”
He concluded: “It’s difficult, you can’t really put a gloss on that.”
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While Labour condemned the wave of “stealth taxes” introduced by the Chancellor, the budget also contained significant pledges of support to some of the most vulnerable groups across Britain.
The state pension, benefits and tax credits will all be raised in line with inflation and the national living wage for those aged over 23 will be increased to £10.42 an hour from April.
In addition, energy companies will now pay an additional 35 percent windfall tax on their profits, up from the 25 percent energy profits levy established by Prime Minister Rishi Sunak during his time as chancellor.
While the energy price guarantee implemented by the government under Liz Truss will now remain in place beyond April next year, the annual cost of energy bills is now set to rise from £2,500 to £3,000.
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