Families will pay £ 3,000 more in taxes per year as a result of measures introduced since Boris Johnson came to power, including Wednesday’s budget, says the Resolution Foundation.
The think tank found that the policies announced by Chancellor Rishi Sunak increased incomes by 2.8% for the poorest fifth of households.
However, middle-income households would experience a 2% decline, he added.
Mr. Sunak claimed his budget had “cut taxes for millions of the lowest paid people.”
Speaking to BBC Breakfast, he said the pressures on the economy “will accompany us for a while”, but that the government’s plan is working and “we can face the future with a little more confidence.”
He also said that wages were rising and that he had “cut taxes for millions of the lowest paid”, adding that it was his job to worry about inflation and that his new tax rules were “how to build resilience”.
The Resolution Foundation said the UK is in the worst decade for wage growth since the 1930s.
“The Chancellor yesterday had his first chance to illustrate what the UK’s post-pandemic economy could look like by the mid-2020s,” said Torsten Bell, managing director of the Resolution Foundation.
“It is not the high-wage economy the prime minister predicted last month, nor is it the lower-tax economy that Rishi Sunak said was his target yesterday. Instead, the chancellor has set plans for a new high tax. large-state economy “.
The Foundation’s nocturnal analysis of the 2021 budget and spending review revealed a deteriorating picture of family finances, with household incomes set to stagnate due to rising inflation.
“The higher taxes are no surprise, as the UK is combining fiscal conservatism with an aging society and slow-growing economy. But it’s the end of low-tax conservatism, with the tax levy rising by £ 3,000 per household by the middle of this decade, ”Bell said.
With higher-than-expected growth, inflation and government spending, combined with tax hikes already underway, the Foundation warns the UK could be poised for a flat recovery in household living standards.
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The combined effect of changes in universal credit, alcohol and fuel taxes, higher municipal tax, income tax and national insurance provided a 2.8% increase in household incomes. poor.
But middle-income families will see incomes decline by 2% and the richest fifth of households will experience a decline of 3.1% by the middle of the decade, the Foundation warned.
Changes to the amount households can withhold from their earnings if they have universal credit, announced in the balance sheet, only partially offset the effect of withdrawing the £ 20 per week increase during the pandemic. On average, recipients would lose £ 800 per year, the think tank calculated.
Of the 4.4 million households with universal credit, about three-quarters (3.2 million households) will be worse off as a result of the decisions to lift the £ 20 per week increase, despite the Chancellor’s new universal credit measures in the budget. .
But 1.2 million households would be £ 900 a year better than before the Budget.
In the wider population, wages are set to decline next year after inflation.
It means that the last decade has been the weakest decade for wage growth since the 1930s.
By May 2024, real wages will have grown by only 2.4% since 2008 – compared to a 38% increase in real wages between 1992 and 2008.
“Yesterday the Chancellor received good news for public finances: lower debt, because the economy is doing slightly better than all of us six months ago. But good news for public finances was not good news for finances. of families, “Mr. Bell Foundation told BBC Breakfast.
“This is because the increase in inflation that actually helped the Chancellor with his loan data is obviously hurting household balance sheets, which is why the Office of Fiscal Responsibility expects the incomes and wages of households. families don’t actually grow up at all in the next year.
“So this is going to be really bad news for anyone who cares about their budgets.”
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