IFS autumn statement analysis reveals poorest hit hardest

Thursday, 01 December 2011 08:47

The poorest families in the UK are likely to be hardest hit by the cuts and forecasts announced in this year's Autumn Statement.

Analysis from the Institute for Fiscal Studies (IFS) and the Office for Budget Responsibility (OBR) had originally predicted growth of real household disposable income (RHDI) of minus 1.1 per cent for this year.

However, following the chancellor's announcement, this was revised down to minus three per cent for 2011 as a whole, which is likely to be the largest fall in disposable income ever.

It means per-capita RHDI will have fallen by a projected 4.7 per cent between 2009 and 2012 – the previous biggest decrease was 1.9 per cent between 1974 and 1977.

With real mean earnings growth predicted to be down to minus 4.3 per cent in 2011 and minus 1.3 per cent in 2012, it is likely to mean than RHDI is lower in 2016 than it was in 2006.

In a further blow for the poorest families and those with children, above-inflation increases in Child Tax Credit will not go ahead and more parts of the Working Tax Credit have been frozen.

"We are living through the worst period for changes in measures of average living standards since consistent records began in the mid-50s/early 60s," said the IFS statement.

The OBR predicts that the income will be 3.5 per cent smaller in 2016 than had been thought in March.

"One begins to run out of superlatives for describing quite how unprecedented that is. Certainly there has been no period like it in the UK in the last sixty years," said the IFS's Paul Johnson.

Citizens Advice spokesperson Gillian Guy said: "It's astonishing that George Osborne could think it fair that the lowest paid families who can least afford it should pick up the bill for kick-starting the recovery at a time when they are battling with hikes in fuel bills, rising rent and food costs."



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