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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is director of policy, research and impact at the Trussell Trust, a charity that supports food banks and campaigns to end the need for them across the UK
In delivering yesterday’s Autumn Statement, the UK’s chancellor faced two very different and potentially opposing challenges.
The most pressing, politically, was to calm the party’s base, mollify the Conservative politicians feeling bruised by the cabinet reshuffle and prove that he and the prime minister were sincere in their commitment to tax cuts.
The chancellor’s second challenge was much more important: addressing the escalating crisis of homelessness, destitution and debt among people on low incomes. This is already pushing food banks to breaking point, increasing strain on public services and causing increasing disquiet.
As always in the run-up to a Budget, there were myriad rumours about what might be in it. The most worrying of these was the suggestion that benefits might not be uprated in the usual way. At a time when 3.8mn people live in destitution, record numbers are forced to turn to food banks and the majority of people on universal credit can’t afford essentials, this was a terrifying prospect.
On the face of it, the chancellor just about managed to pass both the tests facing him. He announced not only an enormous package of tax cuts aimed at businesses, but cuts to National Insurance for both employees and the self-employed, together worth around £10bn a year.
And he drew back from the brink and announced not only that benefits would rise with the usual September inflation rate, but also a major boost to Local Housing Allowance, which many people on low incomes rely on to help pay their rent. The latter step was especially significant. LHA has been frozen since 2020 while rents have soared. The growing gap has driven up homelessness and increased hunger and debt. Yesterday, the chancellor implicitly restored the link between LHA and rents, returning to the original intention that the policy should cover the cheapest 30 per cent of rents in every area. Together, these two measures cost about £4.3bn and will ease some of the pressures which have been driving so many people to the doors of food banks.
The chancellor might be expecting to enjoy a good news day, or even week. However, the positive headlines mask some uncomfortable truths.
The cuts to National Insurance, for example, while bigger than expected, are only a fraction of the tax rises already in place through the previously announced freezing of personal tax thresholds, which the Office for Budget Responsibility estimates will raise £44.6bn in 2028-29. The tax burden will still rise every year to a postwar high of 37.7 per cent of GDP by 2028-29.
When it comes to hunger, hardship and debt, even with the chancellor’s boost, universal credit simply won’t meet the costs of essentials. People on low incomes still face severe difficulties, which will continue to damage health and productivity. People are missing meals, having to unplug the fridge and freezer, living in cold, damp houses and missing hospital appointments because they can’t afford the bus fare to get there. On average, real household disposable incomes will have fallen 3.5 per cent between 2019-20 and 2024-25 — the largest reduction in real living standards since ONS records began.
All this creates a challenging backdrop to the general election, especially as it seems the chancellor chose to spend most of his fiscal headroom in this Autumn Statement. Assuming there will be a Budget in March 2024, perhaps the last before the election, it’s unclear how much room the government will have — either to shore up Tory support or reverse the rising tide of hunger and destitution blighting the UK.
Source: Economy - ft.com
