Household incomes have taken a £1,500 hammering since the Brexit referendum, experts reveal today.
The UK has experienced the sharpest slowdown in income growth of any comparable economy, reveals the Resolution Foundation think tank study.
Higher than forecast inflation has also fuelled a plunge in families’ spending power compared with predictions from before the 2016 EU referendum.
The combination meant households had £1,500 less disposable income on average than they would have had under the Office for Budget Responsibility pre-referendum forecast.
The report comes as official GDP figures are expected to show the UK economy at the end of 2018 was 1.1% – some £23billion – smaller than the OBR pre-referendum forecast in March 2016, the think tank says – equivalent to £800 for every household in the UK.
The study says while “no-one can say definitely how much of that lost income is exclusively down to the Brexit effect … it’s hard not to conclude that Brexit must be the single biggest factor”.
Resolution Foundation research director James Smith said: “The UK’s stark under-performance on income growth since 2016 – which has tailed off more than other advanced economies – has left UK households taking a £1,500 hit to their living standards.
“As we approach Brexit day on March 29, politicians in all parties need to recognise how much is at stake for family living standards and that how the country goes forward, not just where it is heading, matters for household incomes in the here and now.”
Meanwhile, a separate report reveals Chancellor Philip Hammond will have to spend billions of pounds extra if he truly wants to end austerity.
Simply to maintain existing per-head levels of day-to-day spending across Whitehall departments which do not have ring-fenced budgets, he would have to find an extra £5billion a year by 2023-24, the Institute for Fiscal Studies warns.
An IFS analysis of options facing the Chancellor in next month’s spending review claims Mr Hammond would need to spend £11billion to avoid it falling as a share of national income.
Research economist Ben Zaranko said: “The Government has already committed to increase day-to-day NHS spending by £20billion over the next five years.
“Even though the latest plans have overall day-to-day spending increasing over that time, these increases wouldn’t be enough even to cover the NHS commitment in full.
“This suggests yet more years of austerity for many public services – albeit at a much slower pace than the last nine years.”
Shadow Chancellor John McDonnell said: “The evidence is mounting that despite Theresa May ’s rhetoric, austerity is not over.
“Unless Philip Hammond, at the very least, finds another £5billion at the spring statement, departments will be planning for yet more cuts next year.
“Nine years of brutal Tory austerity have wounded our public services and the whole country which relies on them.”