Overnight Budget analysis by the Resolution Foundation painted a deteriorating picture of family finances
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Brits will pay £3,000 more in tax on average by 2026 than when Boris Johnson took office as families face deteriorating living standards
Analysis of Rishi Sunak’s Budget by the Resolution Foundation found that taxes as a share of the economy will soar to the highest level since 1950 by the middle of the decade – a £3,000 hike for the average household since Boris Johnson became Prime Minister.
The overall tax burden will be at its highest for 70 years, the Office for Budget Responsibility (OBR) said on Wednesday.
Overnight Budget analysis by the Resolution Foundation painted a deteriorating picture of family finances, with household incomes set to stagnate as a result of rising inflation.
Wages are expected to grow by just 2.4% between May 2008 and May 2024, compared to 36% real wage growth between May 1992 and May 2008, according to the Resolution Foundation.
The UK is still in the midst of its weakest decade for pay growth since the 1930s, the thinktank said.
Nearly three quarters of households will be left worse off even with the changes to the Universal Credit taper rate.
Some 3.2 million households will suffer from the decision to axe the £20-a-week uplift, and then give back via the changes to the taper rate.
Resolution Foundation boss Torsten Bell said growth for family incomes looks “anaemic” despite growing tax revenues and NHS spending.
He said: “It is not the high wage economy envisaged by the Prime Minister last month, or even the lower tax economy that Rishi Sunak said was his goal yesterday. Instead the Chancellor has set out plans for a new high tax, big state economy.
“Higher taxes aren’t a surprise given the UK is combining fiscal conservatism with an ageing society and a slow growing economy. But it is the end of low tax conservatism, with the tax take rising by £3,000 per household by the middle of this decade.
“While tax revenues and NHS spending will be growing rapidly in this economy, growth in pay packets and family incomes looks far more anaemic – a huge challenge that the welcome rise in the National Living Wage and boost to Universal Credit eased, but did not overcome.”
Mr Bell warned that Britain was facing a triple whammy of Covid, Brexit and Net Zero pressures, alongside longstanding challenges of low productivity and inequality.
The think tank found the poorest fifth of households would get a 2.8% income boost by the middle of the decade from policies including changes to the Universal Credit taper rate, reduced alcohol and fuel duties and tax changes.
But middle income households would see an income hit of 2% and the richest fifth would suffer a 3.1% hit.
The Chancellor used his Autumn Budget on Wednesday to lay the foundations for a “post-Covid” era as he took advantage of better-than-expected forecasts to commit to £150bn in spending increase over the next three years.
Mr Sunak opted to restore some of the cash cut from public services during 11 years of Tory Governments, with extra cash for the NHS backlog, schools and transport projects.
But millions of people struggling in the cost of living crisis were left disappointed, as the Chancellor did little to boost those hit by soaring energy bills, tax rises and inflation that may rise at its fastest for 30 years.
Mr Sunak was forced to reassure Tory MPs that he aims to cut taxes before the next election after unveiling his Budget.
He told ITV’s Peston: “We’re both committed to it[tax cuts], the Prime Minister and I want to do it for people, and that’s why we did it today, we cut taxes for those in the lowest pay, to help them right now and we want to lower the burden of taxation, as I said in my speech I want to see taxes going down by the end of Parliament,” Mr Sunak said.
At a meeting of the 1922 Committee of Tory backbenchers, he said he wants to use “every marginal pound” in the future to lower taxes rather than increase spending.
The Budget will face further scrutiny on Thursday morning when the respected Institute for Fiscal Studies think tank publishes its comprehensive analysis.