Austerity policies from the Treasury have resulted in slower growth in every year since 2010 and left each household £300 a month worse off as a result, a thinktank has said.
The New Economics Foundation said its analysis of the impact of tax and spending changes since the Conservatives came to power, first as part of a coalition with the Liberal Democrats, had left the economy £100bn smaller than it would otherwise have been.
Although the peak impact of the attempt to reduce a record peacetime budget deficit occurred during the first two years of the 2010-15 parliament, the thinktank said austerity was still acting as a drag on output.
The NEF said the cumulative effect of tax, public spending and welfare adjustments on growth by the end of the 2018-19 financial year would be to leave the average household £3,629 a year worse off – the equivalent of £1,495 per person.
The latest public finances figures, due out on Thursday, will show whether the chancellor, Philip Hammond, is on course to hit his forecast for a budget deficit in 2018-19 of £25.5bn – one sixth of its level in the aftermath of the financial crisis and deep recession of 2008-09.
Alfie Stirling, head of economics at the NEF, said work by the Office for Budget Responsibility and the Institute for Fiscal Studies made it possible to isolate the effects of austerity.
“At this time of year there is often renewed speculation over whether the chancellor will meet his year-end deficit targets by March. But for nine years, the elephant in the room has largely been missed: the sheer scale of economic damage that these targets have contributed to in the first place.”
The Treasury defended its handling of the economy. “Since 2010 the economy has grown 18.3%, which is faster than France, Italy and Japan. We are taking a balanced approach to restoring the public finances – getting debt falling while investing in our vital public services and keeping taxes low. We’re increasing the national living wage, we’ve frozen fuel duty, and we’re cutting taxes for 32 million people to help families meet the everyday cost of living and keep more of what they earn.”
John McDonnell, the shadow chancellor, said: “Austerity has torn apart the fabric of our society, and this new work by NEF shows just how damaging its impact has been over nine years.”
