ROOF Blog

The true extent of the financial pain that will be felt by households and public services over the next few years has been laid bare by the Institute for Fiscal Studies (IFS).

Even those on half typical earnings will see their living standards suffer as a result of the Chancellor’s policies, the think-tank warns. 

To protect the ‘ringfenced’ areas of hospitals, schools and the police, there will have to be savage cuts to defence, housing, transport and higher education budgets.

Cuts of almost seven per cent a year, 20 per cent over three years, mark the severest squeeze since the Second World War, tougher than anything in the austerity years of the 1970s or early 1980s.

The IFS analysis of the Chancellor’s pre-Budget report also shows a £76bn ‘black hole’ in the public finances; that fixing it will cost every family £2,400 a year; and that only those on less than £14,000 will be better off as a result of the changes.

In the build-up to the pre-Budget report this Wednesday, Pricewaterhouse Coopers (PWC) says the typical British family already faces a decline of 2.4 per cent, or £300 a year, in its discretionary spending power, after tax, mortgages, food and other essentials.

The best-off will see their spending power cut by as much as nine per cent, almost £5,000 a year, the most vicious assault on their living standards in three decades.

The impact of swingeing income tax and national insurance hikes, VAT increases, expected moves back to more normal mortgage rates and higher petrol and transport costs, thanks to the latest boom in world oil prices, will all conspire to devastate the household budgets of the better-off.