UK facing record low for living standards despite budget tax cuts; house prices rise for fifth month running – business live

The recovery in UK house prices has continued last month, new data from Halifax this morning shows.

Halifax reports that average house prices rose by +0.4% in February, the fifth monthly rise in a row.

That left property prices 1.7% higher on an annual basis, a slowdown on the 2.3% increase in the 12 months to January.

The typical UK home now costs £291,699, around £1,000 more than last month, Halifax reports.

In London, prices were higher on an annual basis for the first time since January 2023, while they’re rising fastest in Northern Ireland (up 5% in the last year).

Kim Kinnaird, director of Halifax Mortgages, says the market has made a relatively stable start to 2024, adding:

“In fact, the average price tag of a home is now only around £1,800 off the peak seen in June 2022. While it is encouraging that we’ve seen growth in recent months, what happens next remains uncertain.

Although lower mortgage rates, alongside expectations of Bank of England interest rate cuts this year, should help buyer confidence in the short term, the downward trend on rates is showing signs of fading.

Even with growing wages and inflation falling back, raising a deposit and affording a sizeable mortgage remains challenging, especially for those looking to join the property ladder, so it remains a possibility that there could be a slowdown in the housing market this year.”

Resolution Foundation also reports that pensioners are the big losers from Jeremy Hunt’s Budget.

That’s because national insurance, which was cut by another 2p in the pound yesterday, is paid by workers on their wages, but not by the retired.

Overall, Resolution says, the policy choices announced during this Parliament have shifted support from the rich and the old to the young and the poor.

Resolution’s Torsten Bell says:

“It has been a frenetic few years for tax policy making, with huge rises and cuts announced in quick succession. Middle earners have come out on top, while taxpayers earning below £26,000 or over £60,000 will lose out. The biggest group of losers are pensioners, who face an £8 billion collective hit.

“Looking at all policy changes announced this parliament reinforces the sense that the Government has reversed course from the approach that dominated during the 2010s. Back then, support was focused on pensioners and takeaways on poorer, younger households. This time it is those aged over 65 and on the highest incomes who are set to lose most.

Resolution Foundation’s overnight analysis shows:

• Shifting state support from the rich to the poor… While 78 per cent of the personal tax cuts announced in the 2024 Spring Budget go to the richest half of households, the Foundation’s analysis of all tax and benefit policies announced in this parliament – including changes to National Insurance, Income Tax, pensions tax, non-doms tax and Capital Gains Tax, reductions to the taper rate in Universal Credit, and duty freezes – show a very different picture. Typical households are set to gain £420 a year on average, while the poorest fifth gain £840 and the richest fifth lose an average of £1,500.

• And from pensioners to millennials…. The Foundation’s analysis of these same policy changes across the age distribution shows that households headed by someone aged 18-45 will gain £590 on average, compared to an average loss of £770 for those aged 66 and over.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK is facing a record low for living standards, analysis of yesterday’s budget shows, despite the pre-election tax cuts announced by chancellor Jeremy Hunt.

The Resolution Foundation has crunched the budget, and concluded that Hunt has “thrown fiscal caution to the wind” yesterday, leaving very little room (just £8.9bn) to hit his fiscal rule to have debt falling in five years.

But while Hunt has made a net tax cut of £9bn, the UK’s cost of living crisis means real household disposable incomes (how much money households have after tax, adjusted for inflation) are set to fall between 2019 and 2025 – for the first parliament in modern history.

And looking further ahead, the tax take will be a 70-year high by 2028-29:

Torsten Bell, chief executive of the Resolution Foundation, warns that the budget maths is based on fictional cuts to public services after the election:

The £19 billion of cuts to unprotected public services after the next election are three-quarters the size of those delivered in the early 2010s. The idea that such cuts can be delivered in the face of already faltering public services is a fiscal fiction.

“Budgets are always a big day for Westminster, but the big picture for Britain has not changed at all. This remains a country where taxes are heading up not down, and one where incomes are stagnating.

“Big tax cuts may or may not affect the outcome of that election, but the task for whoever wins is huge. They will need to both wrestle with implausible spending cuts, and also restart sustained economic growth – the only route to end Britain’s stagnation.”

Yesterday, the Office for Budget Responsibility said Hunt’s plans meant funding for non-ringfenced government departments – including local government and prison services – was on track to fall by 2.3% per year.

Here are some of the key points from Resolution’s analysis (they’ll be discussing the budget at an event this morning).

• Filling out the tax sandwich… Fresh reductions in National Insurance and Fuel Duty, coupled with previously announced tax threshold freezes, mean a net tax cut of £9 billion is taking effect in the election year. But this is dwarfed by the estimated £27 billion of tax rises that came into effect last year (2023-24) and the £19 billion that are coming in after the election (2025-27).

• …by throwing fiscal caution to the wind. The Chancellor’s fiscal headroom against his fiscal rules is the second lowest on record, just a third of the average level seen since 2010. But this is not because his fiscal rules are strict – in fact, the plans in this Budget would violate three out of the four sets of such rules followed by Conservative Chancellors since 2010.

• Britain’s £14,000 wage depression… Despite the Office for Budget Responsibility reducing its forecast for inflation, real average wages are only set to regain their 2008 levels in 2026, a staggering near-two lost decades of pay growth. Had pay instead continued along its pre-financial crisis path over this period, the average worker in 2023 would have been around £14,000 better off.

• ….and a record low for living standards. Across this Parliament (between 2019 and 2025), real household disposable income (RHDI) is set to fall by 0.9 per cent – the first parliament in modern history to see a fall in living standards.

The agenda

• 9am GMT: Resolution Foundation event: Assessing the Budget’s economic, and electoral, impact

• 10.30am GMT: Institute for Fiscal Studies presents its Budget analysis

• 12.30pm GMT: Challenger report on US job cuts

• 1.15pm GMT: European Central Bank interest rate decision

• 1.45pm GMT: European Central Bank press conference