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Hammond has enough leeway to spend £15bn on ending austerity, economic think tank suggests

PHILIP HAMMOND has enough leeway to spend as much as £15 billion on ending austerity, a leading economic think tank said today in response to his Spring Statement.

Institute for Fiscal Studies (IFS) director Paul Johnson said the Chancellor should use his summer Spending Review to show that austerity is “really coming to an end” in the 2020-23 period.

The institute pointed out that 10 million households will have lost £420 a year on average from the freeze on working-age benefits, while the seven million poorest households are worse off by an average of £560 a year.

Earnings today are lower than in 2007-08, Mr Johnson said, adding that “work is no longer a guaranteed way out of poverty.”

Sixty-eight per cent of the poorest people in Britain were employed in 2016-17, compared to 44 per cent in 1994-95, he continued.

By 2020, the legal minimum wage is set to remain under the Organisation for Economic Co-operation and Development definition of low pay — two-thirds of median earnings, which should equate to around £9.50 an hour, according to the IFS.

Mr Johnson noted that Labour’s £10 an hour minimum wage would be far closer to that rate than the Tory government’s minimum wage, which is expected to be £8.60 next year.

Responding to the IFS analysis, shadow chancellor John McDonnell condemned Mr Hammond for providing no extra funds for schools, social care or the justice system despite “a windfall from the rapidly rising earnings of the super-rich.”

He said: “The IFS has confirmed what we suspected Philip Hammond was really saying yesterday: that we are a long way from the end of austerity promised by Theresa May last year.

“The IFS also highlighted that there is ‘no reprieve’ for those who rely on social security, with yet another year of cruel real-terms cuts in benefits ahead.

“Austerity has failed on its own terms, as well as for the millions who are paying the price for the Conservatives’ decisions to go ahead with tax cuts for the rich and corporations.”

Mr McDonnell also urged his Tory opposite number to stop using the threat of continued austerity to pressure MPs into backing Theresa May’s twice-rejected Brexit deal.

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