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Autumn Statement: JRF response

Ashwin Kumar, Chief Economist at the Joseph Rowntree Foundation, responded to yesterday’s Autumn Statement 

“2017 is going to be a tough year as wages will barely grow faster than prices.  Whilst there will be modest gains for some people from today’s Autumn Statement, for most people on below-average incomes, these will be dwarfed by previously announced cuts to benefits. 

“With average wage growth predicted to be 2.4% and prices forecast to go up by 2.3%, most families will not feel much better off.  The increase in the minimum wage will bring some relief to those on the lowest earnings, although even this is lower than predicted last March.

“Many families will gain by modest amounts of a few pounds a week from the reduction in the Universal Credit taper rate and the rise in the income tax personal allowance.  However these gains will be dwarfed by much bigger cuts to work allowances imposed by George Osborne in April this year.  A couple with two children each earning £25,000 a year will see a benefit of £588 a year from the income tax and universal credit taper changes, but will lose £1,308 from the benefit freeze and the cut in Universal Credit work allowances.

“The majority of the benefit from the income tax changes will go to better-off families, and the Treasury’s own documents say that it will cost £2 billion in 2017/18.  Spent otherwise, these funds could have made a significant difference to families who are just about managing.

“It’s great to see the Government taking action to support the UK’s renters. Action to cut letting fees, £1.4bn of new funding to build 40,000 new homes and the flexibility to create homes to rent as well as to buy are all extremely welcome. However, the Government’s definition of ‘affordable’ housing will mean that many of these new homes are still out of reach for many people on low or average incomes. We estimate that the UK needs at least 80,000 affordable new homes per year to keep up with demand.

“The Government was right to acknowledge the UK’s productivity crisis, and the work that will be done looking at management skills is particularly good to hear. But the government has restricted its actions on higher productivity to research and development and infrastructure spending.  Low-wage sectors like retail, hospitality and care account for a third of the productivity gap with other European countries that Mr Hammond referred to in his speech, so a targeted plan to support these sectors is vital to closing the gap and raising wages.”

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