The UK is on course for the longest fall in living standards since records began in the 1950s, as analysis shows
Philip Hammond’s budget will drive up inequality.
The Resolution Foundation said the stark downgrade to economic growth revealed by the chancellor on Wednesday means household disposable incomes were now set to fall until 2020. It also found the poorest third are set for an average loss of £715 a year over the coming five years, while the richest third stand to gain £185 on average.
Hammond slashed stamp duty for first-time homebuyers as part of a package of measures to boost the economy, facing evidence that the UK will be one of the weakest-growing major countries over the next five years. Britain’s growth rate was cut from 2% to 1.5% in 2017 and by between 0.2 and 0.5 percentage points over the next four years.
But the Resolution Foundation analysis shows the chancellor could have used his £3bn stamp duty cut to build 40,000 social rented properties or about 140,000homes through the government’s own Housing Infrastructure Fund..
The government’s independent forecaster, the Office for Budget Responsibility, has already warned that the key measure unveiled by the chancellor may backfire by pushing up house prices, benefiting those who already own homes the most.
The policy announced the immediate abolition of stamp duty for all properties up to £300,000 bought by first-time buyers with immediate effect, as part of a range of measures designed to address the UK’s housing crisis. The move will save four out of five first-time buyers up to £5,000.
Those spending up to £500,000 – including most buyers in London – will also benefit, as the first £300,000 of the purchase price will not be subject to the tax. Previously the tax was paid on all purchases over £125,000.
But the OBR said the changes would probably push up property prices by about 0.3%, with most of the increase coming in 2018.
Torsten Bell, the director of the Resolution Foundation, said the stamp duty changes were a “very poor way to boost home ownership”.
“Faced with a grim economic backdrop the chancellor will see this budget as a political success. But that would be cold comfort for Britain’s families given the bleak outlook it paints for their living standards,” he added.
This article first appeared in The Guardian