Good morning and welcome to our ongoing coverage of the world economy, financial markets, the eurozone and the economy.
Some 1.3 million people will fall into absolute poverty over the next year because Chancellor Rishi Sunak yesterday failed to provide more aid to low-income families, according to a new analysis of Wednesday’s spring declaration.
the Dissolution Foundation has reported that Sunak yesterday presented a “large but ill-targeted package of measures” that failed to support families hardest hit by the cost of living crisis.
That means absolute poverty is projected to increase by 1.3 million people next year — including 500,000 children — the first time the UK has seen such a rise outside of recessions, Resolution says.
In a sobering analysis, Resolution explains that household incomes across parliament are expected to fall by 2 percent, making this parliament its worst on record living standard.
Typical working-age household incomes will fall by 4 per cent in real terms over the next year (2022-23), a loss of £1,100.
The poorest quarter of households have been hardest hit – their incomes are expected to fall 6 percent after the Chancellor defied calls to update benefit payments by more than the planned 3.1 percent, a fall in real terms.
Torsten bell, Managing Director of dissolution foundation, says the policy announced yesterday does not fit the Chancellor’s rhetoric.
The decision not to target support to those hardest hit by rising prices will hurt low- and middle-income households as 1.3 million people, including half a million children, fall below the poverty line in the coming year will fall.
“And despite the eye-catching 1p cut in income tax, the reality is the Chancellor’s tax changes will mean seven out of eight workers will see their tax bills increase. These tax hikes mean the Chancellor can point to rapid fiscal consolidation and significant room to maneuver over his fiscal rules.
“The overall picture is that Rishi Sunak has prioritized rebuilding its tax-cut credentials over supporting low- to middle-income households, who will be hit hardest by the rising cost of living, while allowing for fiscal flexibility in the years to come. It remains to be seen whether this will be sustainable in view of the enormous income declines to come.”
Only one in eight workers will see their tax bills go down by the end of Parliament. Despite Sunak’s decision to raise the Social Security threshold by £3,000 in July, Resolution reports:
Considering all the income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25 and only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI). Of the 31 million workers, around 27 million (seven out of eight workers) will pay more income tax and NI in 2024-25.
Yesterday, the Office for Budget Responsibility warned that UK living standards are heading for an historic decline, the tax burden is heading for a 70-year high and inflation is expected to average over 7% this year.
Sunak got most of the public finance windfall from higher tax revenues and lower-than-expected borrowing, a move that could provide firepower for a giveaway ahead of the 2024 election.
But there are dark economic times ahead. Last night, Sunak was challenged on LBC radio by a single mother who told the Chancellor she could not afford to heat her house and had to take two extra jobs.
Hezel, a single mother, said she had a good salary “on paper” but the rising costs had “severely taken a toll” on her ability to care for her children.
Also arrives today
MPs from the Business and Transport Committee hold a hearing on P&O Ferries’ shock firing of 800 workers last week. It starts at 9.30 a.m. with Peter HebblethwaiteCEO of P&O Ferries and Jesper Kristensen, Group COO, Maritime Services, DP World, up at 11am.
Yesterday Boris Johnson said it appeared that P&O Ferries broke the law by suddenly laying off 800 workers and that the government would take legal action.
Purchasing managers’ surveys of UK and euro-zone companies are expected to show a slowdown this month as rising energy prices and the war in Ukraine hit the economy.
Moscow Stock Exchange is scheduled to partially reopen today for an abbreviated session, after a nearly month-long shutdown after shares plunged early in the invasion of Ukraine.
Several measures are being taken to limit the pace of a new sell-off, as Bloomberg explains:
When trading resumes Thursday at 9:50 a.m. in Moscow for a shortened four-hour session, only 33 stocks will be active, including some of the country’s largest companies such as Gazprom PJSC and Sberbank PJSC.
However, foreigners are not allowed to sell shares until April 1, and short selling is not allowed.
- 9am GMT: European Central Bank Economic Bulletin
- 9:00 GMT: Flash Eurozone Manufacturing & Services PMI survey for March
- 9.30am GMT: UK Flash Manufacturing & Services PMI Survey for March
- 9.30am GMT-12.30pm GMT: Transport and Business Committees hear P&O Ferries redundancies
- 10.15 GMT: IFS spring statement briefing