The Institute of Fiscal Studies has warned of a “lost decade” for living standard following Chancellor George Osborne’s Autumn Statement. Incomes in 2015 are likely to be no higher in real terms than in 2002. Despite news that the economy is on the mend, economist have warned that the Chancellor’s plans to keep slashing public spending risk the fragile recovery, which could contract again by the end of 2013 and see barely any growth next year.
Reliable figures for 2013 are not available yet, but the IFS predicts that real incomes will have fallen by 7.4% since 2009, a record amount that hasn’t occurred since 1977 and close to Labour Shadow Chancellor Ed Balls figure of a £1,600 drop.
The Chancellor is reportedly furious with the IFS figures, claiming that real incomes have actually risen by 3.4%, but the IFS says that the method the Chancellor is using is not usually applied to household incomes and “had failed to detect a squeeze on real spending power in any of the four big recessions Britain has experienced since the early 1970s.”
While the freeze on fuel duty will be welcome and the scrapping of Employer National Insurance contributions for those employing young people under the age of 21 could help to stimulate youth employment, the Chancellor’s plans to further slash public spending have been roundly criticised, with the IFS and the Office for Budget Responsibility agreed that if carried out it “would involve shrinking the state to a level not seen since at least 1948.”