Tom Waters

Next week will see the introduction of significant cuts to the generosity of two parts of the working-age benefits system. These will affect some new recipients of employment and support allowance, and any family receiving tax credits or universal credit who has either a newly born first child or a newly born third or subsequent child. The restriction to new claims or new births means that the changes will not result in existing claimants seeing their benefit income fall. But in the long run, these are substantial cuts: together they are expected to reduce government spending by over £5 billion a year in the long run. This observation discusses these changes.

These slides are supplemetary material to the presentation given by Andrew Hood at the IFS post Budget briefing 2017.

The UK economy has already had an extremely tough decade. If it proves right, the weak economic forecast spells more bad news for living standards – while also limiting the scope for the chancellor to do anything about it.

These slides contain supplementary information to accompany the briefing on the outlook for living standards for the Autumn Statement 2016.

This morning the Office for National Statistics announced that CPI inflation rose to 0.9% in the year to October, down from an inflation rate of 1.0% in the year to September but still substantially up from 0.6% in the year to August. The Bank of England expect inflation to rise further, to 2.4% in 2017 and 2.8% in 2018 – considerably higher than the 1.5% and 2.1% expected back in May. Most of this forecast increase is driven by the recent devaluation of the pound, which pushes up the price of imports. In this Observation we look at how the overall 2.5% increase in the price level which is likely to result from sterling’s decline since the June referendum will affect the prices of different goods. We then look at whether this is likely to have a bigger effect on poorer or richer households.

This morning the Office for National Statistics announced that inflation, as measured by the CPI, was 0.9% in the year to September. This is only slightly higher than the 0.6% the Office for Budget Responsibility forecast in the March Budget. But since then many forecasters – including the Bank of England – have revised up their forecasts for future inflation as the sharp drop in the value of the pound since the referendum is expected to push up prices. This observation focuses on one consequence that higher inflation would have: the fact that it would reduce the real incomes of working age families receiving benefits that the Government has frozen in cash terms through to March 2020.