[Economics] UK Budget 2017: More Negative Growth Ahead

With the release of this years autumn budget by Chancellor Philip Hammond, we also got some very gloomy economic forecasts for the next five years. The Office for Budget Responsibility (OBR), which prepares the statistics that the chancellor bases the budget on, is predicting that annual economic growth will be below 2% for the next five years. That's one of the worst forecasts in living memory.

The chancellor says he hopes to prove the bleak economic forecasts released in his budget wrong. It's believed that clarity around Brexit would increase consumer confidence and lead to higher growth. While this may be true, it's seems astonishing to me that the car-crash that is Brexit is still even on the table. One way to achieve clarity would be to admit that Brexit isn't workable, and instead focus on economic recovery from the past decade of so-called austerity and undoing the harm of our amoral government.

What all of this does mean is that the UK is on course for its longest fall in living standards since records began over 60 years ago, according to the Resolution Foundation think tank. It's analysis of the budget says that the squeeze on incomes is set to last longer than that which followed the post-2008 crash. The Resolution Foundation also said that the £3bn cost of the Stamp Duty measure broke down to a subsidy of £160,000 per extra home owner. This means the chancellor could have simply bought people typically priced properties in over a quarter of local authorities, or built around 140,000 homes.

On the surface, this Stamp Duty measure seems to benefit the young or those on lower incomes by helping them get on the property ladder. However, the Office for Budget Responsibility (OBR) were quick to contradict the chancellor , saying:

"The main gainers from the policy are people who already own property, not the FTBs [first-time buyers] themselves."

Office for Budget Responsibility (OBR)

They also stated that the main effect of the stamp duty change will be to push up prices by 0.3% during 2018. Rather than easing the property market, this means the chancellor's measures will inflate it. This tax break, as many have pointed out, would also massively benefit those looking to purchase houses in the region of £300,000 to £500,000. They would only have to pay £10,000 in duty on a £500,000 property, £5,000 less than under the previous rules.

It's reported that this tax relief would only benefit roughly 3,500 people. With it costing £3.2bn, that would mean on average a cost of £924,285.71 for each of them. That figure is just staggering.

Although this budget was implied to be one that benefits those seeing true economic and social hardship, in reality it seems to be rather different.

References:
[BBC] UK economy faces 'longest fall in living standards in 60 years' - http://www.bbc.co.uk/news/business-42087881
[BBC] Summary of Budget 2017: Key points at-a-glance - http://www.bbc.co.uk/news/uk-politics-42056452
[theguardian] Stamp duty cut for first-time buyers will push up prices, warns OBR - https://amp.theguardian.com/uk-news/2017/nov/22/stamp-duty-cut-first-time-buyers-fix-housing-market-budget-2017