Hunt’s autumn statement on Thursday included £30bn of spending cuts and £25bn of tax rises in a bid to restore Britain’s credibility and tackle rising inflation. As a leading think tank said the country had entered a new era of higher taxation and public sector austerity, the UK chancellor argued the challenge could not be met by raising incomes from the rich alone. “It’s not possible to raise £25 billion in taxes just by focusing on a very small group of very rich people and I’m very open to that,” he told the BBC. But the scale of the problems facing the country as a whole is illustrated by figures from the Resolution Foundation think tank, which said on Friday that British workers were “living through two decades of wage stagnation”. The Office for Budget Responsibility projected Thursday that average real wages won’t recover to 2008 levels until 2027. Such prolonged stagnation in real wages has not been experienced in the country since the 1820s, according to figures calculated by the Financial Times based on long-term estimates of UK economic statistics. The Resolution Foundation calculated that if wages, adjusted for inflation, had risen at the pre-financial crisis rate of around 2% a year since 2008, average real earnings would have been £15,000 a year more in 2027 than the OBR now expects. He added that the “stealth” tax increases announced by the chancellor, freezing many tax caps and benefits across the system, would reduce typical household income by 3.7%. This will be spread relatively evenly across families with different incomes from the middle to the top of the income scale. The poorest households will be compensated with benefits and pensions adjusted for inflation. Real disposable income is expected to fall by 7.1% over the next two years, the biggest fall in six decades, according to OBR estimates. But Ben Nabarro, chief UK economist at Citi, said Hunt’s tax rises and spending cuts were “the bare minimum” necessary to restore credibility to the UK’s public finances and not enough to prevent the Bank of England to raise interest rates. The investment bank raised its interest rate forecast after the Autumn Statement, saying the “never, never” fiscal policy would require the BoE to be more aggressive and raise rates from the current 3 percent rate in 4.25 percent. Nabarro added that the UK government’s reluctance to take more decisive action to reduce government borrowing suggests that “the UK clearly lacks not only fiscal space, but also political space.” Opposition parties accused the Conservatives of needlessly squeezing middle-income earners. Speaking on ITV on Friday, Labour’s shadow chancellor Rachel Reeves said ordinary workers had “seen their pockets squeezed” due to the implementation of a “whole range of predatory taxes and council tax increases”. Lib Dem Treasury spokeswoman Sarah Olney warned the “already squeezed middle” was being “pushed to the brink” by the government’s policies. Conservative-leaning newspapers also attacked the government, with the Daily Telegraph accusing Hunt of “clutching[ing] workers with tax rises’ and the Daily Mail splashing ‘Tories soak the strivers’ on its front page. Recommended James Smith, director of research at the Resolution Foundation, said there was no avoiding “Britain getting poorer” in an energy shock and the chancellor had to decide who paid the price. “[Hunt] decided that households will do so with higher energy bills, higher taxes and worse public services than previously expected. “Whether the choices were difficult to make or not, the reality of living in the next few years will be,” he said. Paul Johnson, director of the Institute for Fiscal Studies, another leading think-tank, said higher taxes were almost certainly “here to stay.” As the IFS signaled what it said was a “new era” of high taxes and austerity, it said the tax burden would settle at “the highest sustained level in history relative to national income”. According to its calculations, the burden will be at least four percentage points of GDP higher than it has been for most of the past 70 years — the equivalent of £100bn. “We are . journey”.
