Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Around 1.3 million people will fall into absolute poverty over the next year because chancellor Rishi Sunak didn’t provide more help for low-income families yesterday, according to new analysis of Wednesday’s spring statement.
the Resolution Foundation has reported that Sunak delivered a “big but poorly targeted policy package” yesterday, which failed to support those families hit hardest by the cost of living crisis.
That means that absolute poverty is expected to rise by 1.3 million people next year – including 500,000 children – the first time Britain has seen such a rise outside of recessions, Resolution says.
In a sobering analysis, Resolution explains that household incomes are forecast to fall by 2 per cent across the parliament as a whole, making this parliament the worst on record for living standards.
Typical working-age household incomes are to set to fall by 4 per cent in real-terms next year (2022-23), a loss of £1,100.
The poorest quarter of households face the most pain – their incomes are set to tumble by 6 per cent, after the chancellor resisted calls to update benefit payments by more than the planned 3.1%, which means a fall in real terms.
Torsten Bell, chief executive of the Resolution Foundation, says the policies announced yesterday don’t match the Chancellor’s rhetoric.
The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.
“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’s tax changes mean that seven-in-eight workers will see their tax bills rise. Those tax rises mean the Chancellor is able to point to a swift fiscal consolidation and significant headroom against his fiscal rules.
“The big picture is that Rishi Sunak has prioritized rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead. Whether that will be sustainable in the face of huge income falls to come remains to be seen.”
Only one-in-eight workers will actually see their tax bills fall by the end of the parliament, Resolution reports, despite Sunak’s decision to lift the National Insurance threshold by £3,000 in July:
Considering all income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25, and only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI). Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and NI in 2024-25.
Yesterday, the Office for Budget Responsibility warned that UK living standards are heading for a historic fall, with the tax burden heading for a 70-year high and inflation likely to average over 7% this year.
Sunak banked most of a windfall in the public finances from higher tax receipts and lower-than-expected borrowing, a move that could create firepower for a pre-election giveaway in 2024.
But there are dark economic times ahead. Last night, Sunak was challenged on LBC Radio by a single mother who told the chancellor she cannot afford to heat her home and has had to take on two extra jobs,
Hezel, a single mother, said she had a good salary “on paper” but rising costs had put “an intense strain” on her ability to provide for her children.
Also coming up today
MPs on the Business and Transport committee are holding a hearing into P&O Ferries’s shock sacking of 800 workers last week. It starts at 9.30am, with Peter Hebblethwaitechief executive, P&O Ferries, and Jesper Kristensen, Group COO, Maritime Services, DP World, up at 11am.
Yesterday, Boris Johnson has said it appears P&O Ferries broke the law when it suddenly sacked 800 workers, and that the government would take legal action.
Purchasing manager surveys from UK and eurozone companies are expected to show a slowdown this month, as soaring energy prices and the Ukraine war hits the economy.
Moscow’s stock market is to partially reopen today for a shortened session, after a near month-long shutdown after stocks plunged when the Ukraine invasion began.
Several measures will be in place to limit the pace of a new selloff, as Bloomberg explains:
When trading resumes at 9:50 am in Moscow on Thursday for a shortened four-hour session, only 33 stocks will be active, including some of the nation’s biggest companies, such as Gazprom PJSC and Sberbank PJSC.
However, foreigners won’t be allowed to sell equities in a ban scheduled to last until April 1, and short selling won’t be permitted.
- 9am GMT: European Central Bank economic bulletin
- 9am GMT: Eurozone flash PMI survey of manufacturing and services companies for March
- 9.30am GMT: UK flash PMI survey of manufacturing and services companies for March
- 9.30am GMT-12.30pm GMT: Transport and Business Committees hearing into P&O Ferries sackings
- 10.15am GMT: IFS briefing on the spring statement
George is Digismak’s reported cum editor with 13 years of experience in Journalism