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Living standards will continue to fall, warns Osborne
LIVING standards will continue to fall through to the general election, George Osborne was warned last night – just hours after his ‘mini-Budget’.
In a gloomy forecast for family finances, the Chancellor’s independent watchdog said inflation will continue to outstrip wage growth, despite the economic recovery.
Robert Chote, head of the Office for Budget Responsibility (OBR), said: “It is only in 2015 you get any serious real income growth in our forecast.”
The warning was seized on by Labour as further evidence that people are suffering a ‘cost-of-living crisis’, despite healthy economic growth figures.
Shadow Chancellor Ed Balls said the OBR’s figures showed real wages would plunge by 5.8 per cent over the five years of this parliament, compared with RPI inflation.
And he told Mr Osborne: “Under you and this prime minister, for most people in this country, living standards aren't rising - they are falling year on year on year.
“Prices will continue to rise faster than wages this year and into next year too and, as a result, people will be worse off in 2015 than they were in 2010?”
The verdict threatened to take the shine off an autumn statement in which the Chancellor announced bumper growth forecasts and falling borrowing.
A jubilant Mr Osborne told MPs: “The plan is working. It’s a serious plan, for a grown up country.
“But the job is not done. By doing the right thing, we’re heading in the right direction. Britain’s moving again - let’s keep going.”
The Chancellor announced: * Higher growth forecasts for this year (up from 0.6 per cent to 1.4 per cent) and next year (from 1.8 per cent to 2.4 per cent).
* Borrowing down to £111bn this year - £9bn less than forecast in March – leading to a “small cash surplus” in 2018-19.
* A £300m increase in local authority borrowing for housebuilding – if councils agree to sell and land and expensive social housing.
* A further freeze in petrol taxes – with a planned 2p rise next year scrapped.
* Rail fares will rise only in line with RPI inflation next month – not RPI plus one per cent.
* A £1,000 cut in business rates for small shops and pubs, for the next two years - and halved rates for new occupants of vacant shops.
* The scrapping of National Insurance (NI) contributions on 1.5m jobs for young people.
* A threat to strip benefits from jobless under-21s who refuse to go on training courses “from day one”.
The Treasury said 14,000 businesses in the North East would enjoy the £1,000 business rates discount, while 52,000 would see their rates capped.
But Mr Osborne also announced that Scotland would – thanks to the Barnett Formula – receive a budget increase, while local council cuts are stepped up in England.
And the OBR analysis sparked fears of a fresh housing bubble, with prices now expected to be higher than five per cent in 2014 and seven per cent in 2015.
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