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Brexit hits households hard

Published: 27 Nov 2016

Family budgets to be further squeezed following Autumn Statement.

As the impact of the Chancellor’s Autumn Statement is examined by think-tanks and independent analysts, it is clear that the UK’s weak economic outlook and the UK Government’s austerity policies will hit low income family incomes hardest, Finance Minister Derek Mackay said.

Analysis by the Institute for Fiscal Studies (IFS) shows that as a result of this slowdown, by 2021 incomes across the UK will still be lower than they were in 2008. That implies 13 years without any growth in real wages – the longest period of stagnant wages since World War II. 

Meanwhile, the Office of Budgetary Responsibility (OBR) has set out the detrimental impact that Brexit and the UK Government’s approach to the negotiations is having on the economy. They expect that the uncertainty generated will lead to investment being postponed or cancelled; higher inflation squeezing households’ real incomes; and that trade with the EU will be reduced. 

Analysis of the Chancellor’s Autumn Statement has also shown that the measures he announced will do little to offset the cuts to social security already put in place by the UK Government. For example, the Resolution Foundation estimate that a dual earning family with three children on low incomes will still be £3,650 worse off by 2020 as a result of the changes to the economic outlook and policy measures being introduced in this parliament.  Likewise, they expect some lone parents to be up to £2,640 a year worse off.

Mr Mackay said:

“Brexit has blown a huge hole in the UK economy – and the Chancellor’s Autumn Statement is an admission of that.

“With real wages forecast to still be lower in 2021 than they were prior to the financial crisis, Brexit is driving a decline that will be felt for generations.

“Meanwhile, the OBR has said that leaving Europe will create a £58 billion hole in the public finances, and unfortunately it’s families that are having to pick up the tab.

“Scotland did not vote for Brexit yet this renewed economic squeeze is going to hit hard-working families here who are already struggling to make ends meet.  

“The tax and welfare reforms being introduced by the UK Government during this parliament are highly regressive, with those on the lowest incomes seeing the largest losses in both cash terms and as a share of their incomes.

“And I am deeply worried by reports that UK changes to tax and welfare through to 2020 will result in the poorest families with children seeing their incomes fall by up to £3,300 according to the IFS – that is a cut of nearly 18%. But we have seen no reversal on the UK Government’s damaging austerity agenda – in fact the Joseph Rowntree Foundation has highlighted that changes to universal credit are dwarfed by the existing UK cuts to social security. 

“The Scottish Government, in contrast, is taking a very different approach to growing our economy, building a fairer welfare system and protecting our relationship with Europe. I was disappointed to see the Chancellor failing once again to commit to the single market instead pandering to the hard-Brexit agenda that is damaging our economy. 

“I look forward to publishing the Scottish Draft Budget next month that will support our economy, tackle inequality and provide high quality public services for all – underlining once again the stark contrast between our two governments.

“Our overriding focus must now be on safeguarding Scotland’s place in Europe and continued membership of the single market, to protect us from the disastrous economic impact of Brexit, which is becoming clearer by the day.”

Background

The Scottish Draft Budget 2017-18 will be published on 15th December. 

The Scottish Government has set out key commitments in its Programme for Government around the NHS, early years, attainment, policing and support for business - aimed at supporting the economy, tackling inequality and providing high quality public services. http://www.gov.scot/programme2016