For the first time ever, households will be poorer at the end of a parliament term than at the start, a think tank has said, as overall taxes are rising and government departments experience an effective budget cut.
It’s the richest in society who will benefit from the policies announced in the autumn statement, according to the Resolution Foundation, which aims to improve the standard of living for low and middle-income families.
Overall, taxes are rising, the foundation said, echoing analysis of the independent budget forecaster the Office for Budget Responsibility (OBR).
Households are set to be an average of £1,900 worse off by the end of the five years of the current parliament, the foundation calculated, as disposable incomes are on track to fall 3.1% from December 2019 to January 2025.
8:50 ‘Clear choice’ at the next electionWhile the rich have benefitted most from the tax and benefits changes of the autumn statement, across the five-year parliamentary term they also lose out.
Richest households are on average £1,100 worse off from the 2019 start to the anticipated January 2025 term end, while the poorest 20% of the population gain roughly £700.
4:22 Analysis: Autumn Statement 2023The autumn statement gains to the rich flow from cuts to national insurance and benefits increases, including an 8.5% increase in the state pension. It equates to a £1,000 boon for the rich, five times the gains for the bottom fifth of earners who are £200 better off.
More on Uk Economy Related Topics: UK economyThe announced tax cuts by Chancellor Jeremy Hunt are overshadowed by recent rises, the Resolution Foundation said.
“Tax cutting rhetoric clashed with tax rising reality, and positive steps to encourage business investment combined with a growth sapping hit to public investment,” the think tank’s chief executive Torsten Bell said.
AdvertisementWhile £20bn of tax cuts were announced on Wednesday, £90bn in tax rises, such as higher corporation tax and increases to national insurance, had been announced this parliament.
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Taxes are expected to rise by 4.5% as a measure of economic activity, gross domestic product (GDP), between the 2019-20 financial year and the 2028-29 financial year.
This increase is equivalent to £4,300 per household.
The result of Mr Hunt’s government budget freezes is departments, such as the Home Office and Department of Justice, face real terms funding cuts of 14% as the freeze doesn’t factor in inflation. This cut is equivalent to a £17bn deduction.
Forecasts from the OBR showed taxes are still trending upwards – with a post-war high of 37.7% set to be reached by 2028/29 under current government plans.