The Autumn Statement has made it quite clear: winter is coming for our personal finances and despite what the chancellor claims, it’s the people in the middle who are now feeling the chill.
If you’re renting or have young children, this is especially the case — yet there was precisely nothing in Thursday’s announcement for you.
British workers are living through a two-decade stagnation in wages, a squeeze on real incomes on a scale not seen since the 1820s, according to analysis by the Resolution Foundation think-tank.
The chancellor has provided support for the very poorest and relief for the very richest (there was some symbolic tax tinkering, but none of the rumoured nasties).
Meanwhile, those in the middle face higher council tax, energy bills and a protracted squeeze from higher income taxes as thresholds enter the deep freeze.
The pain will be particularly acute if you’re on the cusp of a frozen threshold. Those earning £50,000 — just below the higher-rate tax threshold — stand to pay nearly £2,000 a year in extra income tax by 2028, according to calculations by accountants Moore Kingston Smith, factoring in the likely effects of “fiscal drag” as inflation pushes up pay.
If you’re a parent, this will be even more costly due to the removal of child benefit. A similar cliff edge awaits at the £100,000 threshold where the personal allowance is tapered away and access to “free” childcare hours are lost.
Young professional workers in London and the south-east are suffering from a growing sense of impending financial doom — and politicians need to listen to them.
“I’m a reasonably well paid middle class professional, so I feel guilty about moaning as I’m obviously better off than so many others,” says Max, a reader in his early 30s who messaged me after a recent podcast.
Renting with friends in a shared house, he has been leading negotiations with their landlord after being hit with a 30 per cent rent increase. He has given up all hope of ever being able to buy a home and would struggle to afford renting a one-bedroom flat with his partner.
A pay rise would be welcome, but it would need to be pretty huge to cover the surge in his living costs, which are increasing at a faster rate than his friends with mortgages. The coming recession only adds to his jitters.
Almost one in five UK households rent privately, and across England, rents are rising at twice the rate seen between 2018 and 2021. Those who can’t afford to buy are in an invidious position. “Even if you don’t move, rents are going up as the current shortages are dictating market prices,” says the property expert Henry Pryor.
He doesn’t expect first-time buyers to benefit from the market’s current woes. “Nine out of ten of my most recent new business inquiries have decided to postpone until next year, and it will be Easter before sellers accept that prices have changed,” he predicts.
The amount of floor space renters get for their money has declined by around one-fifth over the past 20 years, and if they need to move, finding a new place is a nightmare.
The website Spareroom.com reports that there are currently seven renters chasing every available room in London. Expect something akin to a job interview if you apply for a house share (one friend was even asked for his CV).
I met a 20-something TV producer this week who has been trying for months to shift from east to west London, but rooms and flats anywhere near her price range get snapped up online within minutes. Since moving jobs, she spends three hours a day traversing the capital. Her landlord has just served eviction papers as he wants to sell up.
Some pundits predict more “accidental landlords” could be prompted to sell before Hunt’s cuts to capital gains allowances kick in next April, which means the market could get even tighter.
Other landlords no doubt want to get out before the Renters’ Reform Bill makes its way through parliament (Ministry of Justice data shows evictions are at their highest level since records began in 1999).
Those in their 20s and 30s who have managed to buy a home face a different set of financial pressures.
With the Office for Budget Responsibility predicting a 9 per cent fall in house prices, recent buyers are more at risk of negative equity and higher loan-to-value ratios make for more expensive mortgage rates.
This only adds to the sense of foreboding when fixed-rate deals expire.
Some homeowners might be cutting holidays, big-ticket purchases and shelving plans for home improvements — but I know others who are putting starting a family on hold, fully aware of the high cost of childcare.
Others — including Jess, a recent guest on Money Clinic podcast — are timing the conception of their second children to explicitly coincide when the 30 “free” hours of nursery care kicks in for their first-born.
With no word of the childcare reforms promised (albeit fleetingly) at the doomed “mini” Budget, and nothing yet appearing on the horizon to replace Help to Buy, this surely presents a political opportunity for the Labour party to exploit?
The promise of free or much better subsidised childcare for the under 3s would be a guaranteed vote winner with the younger generation, as would any state-backed programme to incentivise building homes for rent.
Before you ask which magic money tree could fund this largesse, look no further than the homes you currently live in.
One of the many sacred cows that the chancellor was said to be sizing up for slaughter in the build-up to the Autumn Statement was capping or removing main residence relief.
Landlords and second home owners have to pay capital gains tax when they sell up, but there’s no such tax on homeowners sitting on huge amounts of housing equity after surfing the wave of low interest rates.
You may well shudder at the thought of this kind of relief being tinkered with by a future government — as someone working hard to pay off my mortgage, I certainly would. But the financial divide between owners and renters is getting deeper, and policymakers simply cannot go on ignoring it.
When you look at this from the perspective of those being charged ever increasing amounts with little security of tenure, I can think of 8mn renters who would have no problem voting for it.
Claer Barrett is the FT’s consumer editor and the author of “What They Don’t Teach You About Money”. [email protected]; Twitter and Instagram: @Claerb
