The Institute for Fiscal Studies (IFS) has warned that household incomes will see their biggest drop in generations following the Autumn Statement.

The think tank warned that growth in living standards had been weak since 2008 and that it was now going from ‘bad to worse‘.

Paul Johnson, Director of the IFS, said:

‘Jeremy Hunt’s first fiscal event as Chancellor was a sombre affair. Surging global energy prices have made the UK a poorer country. The result is an OBR forecast that the next two years will see the biggest fall in household incomes in generations.

‘Unsurprisingly given the cost-of-living crisis, today’s Office for Budget Responsibility forecast suggests that this is going from bad to worse. This year we are set to see the largest fall in real household disposable income per head since the late 1940s

‘As ever, the forecasts are uncertain. The government’s finances could end up much healthier than expected. But if the outlook deteriorates further then Jeremy Hunt really has not left himself with much room to manoeuvre.’

Internet link: IFS website

The UK economy is to suffer the biggest hit of all the G7 nations next year, according to a report from the Organisation for Economic Cooperation and Development (OECD).

The OECD forecasts that the UK’s GDP will reduce 0.4% next year and grow 0.2% in 2024. This is better than previous OECD predictions which has been for the economy to remain static.

The only other G7 economy to contract next year is Germany’s. which will experience a smaller contraction of 0.3%.

Growth will be small in the majority of the G7 nations. Italy’s GDP will grow 0.2%, the US will see 0.5%, France will experience 0.6% while Canada and Japan will see rises of 1% and 1.8% respectively.

The government’s Energy Price Guarantee scheme will increase inflation, requiring hiked interest rates which will result in higher borrowing costs, said the OECD report.

Mathias Cormann, OECD Secretary-General, said:

‘The global economy is facing serious headwinds. We are dealing with a major energy crisis and risks continue to be titled to the downside with lower global growth, high inflation, weak confidence and high levels of uncertainty making successful navigation of the economy out of this crisis and back toward a sustainable recovery very challenging.

‘An end to the war and a just peace for Ukraine would be the most impactful way to improve the global economic outlook right now. Until this happens, it is important that governments deploy both short- and medium-term policy measures to confront the crisis, to cushion its impact in the short term while building the foundations for a stronger and sustainable recovery.’

Internet link: OECD website

Workers have saved more than £114 billion into their pension pots since pensions automatic enrolment was implemented ten years ago, according to data published by the Department for Work and Pensions (DWP).

The data showed that more than 10.7 million employees were paying into a workplace pension in 2021. The proportion of young people saving into a pension has more than doubled since the introduction of pensions auto-enrolment in 2012, according to the statistics.

The government says it intends to continue work to further boost the amount of people in a workplace pension. It says it will explore how auto-enrolment can ‘go even further to help more people save more, sooner‘ by abolishing the Lower Earnings Limit for pension contributions and reducing the eligible age to 18.

Laura Trott, Minister for Pensions, said:

‘Automatic enrolment has completely transformed how people save – with staggering results. In the ten years since its introduction, 10.7 million people have started saving for their pensions with this easy-to-use scheme. We have also seen a huge and much needed increase in women and young people being enrolled into a pension.’

Internet link: GOV.UK

A significant number of UK businesses that trade internationally expect to see an increase in their exports over the coming year, according to an Institute of Directors (IoD) survey.

The survey showed that 42% of UK international traders expect export growth over the next 12 months. It also revealed that 47% of businesses are still finding Brexit challenging, and just 33% envisage opportunities materialising as a result of Brexit.

Additionally, 28% of firms reported that supply chain disruption has had a negative impact on their business, and 12% have an exportable product but are not currently exporting.

Emma Rowland, Policy Adviser for Trade at the IoD, said:

‘There is no doubt that smaller businesses in particular are finding the current international trading environment challenging. Importers and exporters feel especially constricted by the UK’s new trading relationship with the EU.

‘It is therefore encouraging that, in spite of these barriers, businesses are anticipating an increase in exports over the coming months. There are opportunities that give traders reason to be optimistic.’

Internet link: IoD website

The UK’s Digital Services Tax (DST) raised £358 million from large digital businesses in the 2020/21 tax year, according to data published by the National Audit Office (NAO).

The DST was introduced in April 2020 to combat the government’s fears that the international tax system ‘did not recognise the value being generated for digital companies through UK online users’. The tax targets firms that make large revenues from UK users of social media platforms, online search engines and online marketplaces.

The NAO found that HMRC collected 30% more DST in its first year than originally predicted. It said that most firms that are liable for the tax now pay more in DST than corporation tax.

Gareth Davies, Head of the NAO, commented:

‘The DST has succeeded in raising more tax from some big digital companies and has brought in more money than forecast in its first year. However, HMRC could still face challenges enforcing compliance, especially among groups without a physical presence in the UK.

‘It should ensure that big digital companies operating beyond the UK’s borders are aware of the tax and comply with it.’

Internet link: NAO website