1. Support for households in the face of the cost of living crisis.
2. Set up the tax cuts to come.
Did he deliver?
@JamesSmithRF The key economic context is the @OBR_UK forecasting the highest inflation for 40 years this year....
@JamesSmithRF@OBR_UK The Chancellor's policy response centred around a 5p fuel duty cut, a big increase in the NICs threshold and £500 million increase to the Household Support Fund (plus energy bills rebate package announced earlier). Notably nothing to address the £11bn real-terms cuts to benefits.
@JamesSmithRF@OBR_UK The policies announced in the #SpringStatement2022 offered something for everyone - but mainly for richer households who will receive £2 of every £3 spent
@JamesSmithRF@OBR_UK Adding in all policies taking effect in 2022-23, incuding previously announced tax rises. the package is more progressive - but basically offers very little to most households in the face of the biggest cost of living crisis Britain has faced in generations.
@JamesSmithRF@OBR_UK As a result, typical incomes will fall by over £1,000 next year (2022-23) - the biggest falls in generations (and will continue to fall in 2023-24)
@JamesSmithRF@OBR_UK And the lack of support for low-income families in the face of this cost of living crisis means that levels of absolute poverty are set to rise by 1.3 million next year to around 12.5 million - first time we've seen a rise like this outside of recessions...
@JamesSmithRF@OBR_UK Turning to tax.... A surprise 1p Income Tax cut is dwarfed by previous tax rises… 7-in-8 workers will pay more income tax and NI in 2024-25.
@JamesSmithRF@OBR_UK Turning to the good news, at least the public finances are in better shape.
@JamesSmithRF@OBR_UK the improved picture on the public finances is due to the higher tax receipts seen during the pandemic recovery will last - and more than offset higher debt interest payments and tax cuts.
@JamesSmithRF@OBR_UK This means that borrowing is falling rapidly, and the Chancellor has increased his fiscal headroom to £28 billion. Maybe he's keeping his powder dry for further fiscal action later in the year (though the cost of living crisis is happening right now)
@JamesSmithRF@OBR_UK In summary, did the Chancellor do enough to protect families from the cost of living crisis and showcase his tax cutting credentials? In our view, he came up short on both counts.
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It’s hard to overstate the scale of the cost of living crisis coming - but the Chancellor has prioritised burnishing his tax-cutting credentials over support for the low-to-middle income households hardest hit by this crisis - THREAD
Rising inflation is forecast to make the year ahead very difficult for family finances. Real household income per person is set to fall by 2.2 per cent in 2022-23, the largest financial year fall on record going back to 1956-57.
The current fall in real wages is not projected to end until late 2023, and will leave average wages no higher than in 2007.
Some fiscal charts on today's #SpringStatement 🧵- The Chancellor benefitted from a significant improvement in the underlying fiscal outlook, with the OBR expecting cumulative borrowing over the forecast to be over £42bn lower (in today's prices) than expected back in October.
In line with the fall in borrowing, government debt is also forecast to be lower throughout the forecast, with it now expected to fall below 80 per cent of GDP by 2026-27.
The Chancellor has decided to 'spend' only a minority of the improvement in the fiscal outlook on tax cuts. In 2026-27, the OBR project underlying borrowing to be £15bn lower than previously forecast, while new policies add just £3bn to borrowing.
Today's #SpringStatement comes as households face a prolonged period of high inflation. The OBR has more than doubled its forecast for inflation in Q4 2022 to 8.7% – the highest in 40 years. This means pay packets will continue to shrink, along with vital income support like UC🧵
The highest inflation in 40 years means that real household disposable income per person – a key measure of living standards – is forecast to fall faster in 2022-23 than in any other financial year on record (back to 1956-57) even after measures announced in the Spring Statement.
The current fall in real wages is now not projected to end until late 2023, and will leave average wages no higher in real terms than they were back in 2007.
Today's #SpringStatement comes as households face a prolonged period of high inflation. The OBR has more than doubled its forecast for inflation in Q4 2022 to 8.7% – the highest in 40 years. This means pay packets will continue to shrink, along with vital income support like UC.
As the chart below makes clear, real household disposable income per person – a key measure of living standards – is forecast to fall faster in 2022-23 than in any other financial year on record (back to 1956-57) even after measures announced in the Spring Statement.
The impact of inflation on day-to-day public spending is lower than expected due to the source of inflation being largely imported. Overall spending is expected to be around £5.6 billion smaller in real terms in 2026-27 than expected in autumn
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