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Rishi Sunak and Jeremy Hunt will oversee the first ever fall in living standards between elections despite Wednesday’s tax-cutting Budget, the Resolution Foundation has warned.
In a damning assessment of the state of the economy, the think tank said this has been a parliament of “flatlining growth” and falling living standards.
And, even accounting for the chancellor’s national insurance giveaway, the Resolution Foundation said that by the next election, households’ disposable income will have fallen by 0.9 per cent - the first parliament in modern history to see a fall in living standards.
Chancellor Jeremy Hunt gave workers a 2p national insurance cut on Wednesday
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Chancellor Jeremy Hunt gave workers a 2p national insurance cut on Wednesday
(PA Wire)
Chief executive Torsten Bell said: “Budgets are always a big day for Westminster, but the big picture for Britain has not changed at all. This remains a country where taxes are heading up not down, and one where incomes are stagnating.”
And he told BBC Radio 4’s Today programme: “If you look over the course of the last 15 years, what we see is that our wages today are back where they were in 2008.
“In fact, the Office of Budget Responsibility (OBR) says we won’t get back to 2008 wage levels until 2026.
“That’s 18 last years of wage growth.”
The think tank also pointed to the “implausible” post-election spending cuts pencilled in by Mr Hunt to give him room for the tax handouts without breaching his so-called “fiscal rules”.
Mr Bell added: “Big tax cuts may or may not affect the outcome of that election, but the task for whoever wins is huge.
“They will need to both wrestle with implausible spending cuts, and also restart sustained economic growth – the only route to end Britain’s stagnation.”
It comes after Mr Hunt used Wednesday’s Budget, likely the last before an autumn general election, to cut 2p from national insurance, saving a person on an average ￡35,000 salary around ￡450 a year. Combined with a cut last autumn, the chancellor said average earners would now be ￡900 better off.
But despite the handout, which Mr Hunt and the PM had hoped would boost the Tories’ dire poll ratings, experts warned the savings for voters had been eclipsed by the amount taken back through so-called stealth taxes.
The highly respected Institute for Fiscal Studies (IFS) said for every ￡1 handed back to voters by the chancellor, the decision to freeze tax thresholds would claim ￡1.30 as taxpayers are dragged into higher brackets.
Defending his Budget on Thursday, Mr Hunt said he was bringing down the tax burden “in a way that is responsible and protects our public services”.
Rachel Reeves accused the chancellor of giving with one hand and taking ‘much more’ back with the other
(PA Wire)
“That’s what I have done in the autumn statement and the spring Budget, if you want to see that continue then it is only the Conservative Party that wants to bring down the tax burden,” he told Sky News.
Mr Hunt also doubled down on the suggestion he wants to phase out national insurance as a tax altogether, describing it as an “unfair” levy. He admitted it will not happen “any time soon”, but suggested one option would be to merge income tax and national insurance.
Pressed on whether Wednesday’s Budget set the stage for a May 2 election, Mr Hunt insisted it was a decision for Mr Sunak, whose current plan is to go to the country this autumn.
It came as shadow chancellor Rachel Reeves savaged the Budget, highlighting Labour analysis of OBR figures which show average families will be left ￡870 per year worse off by Mr Hunt’s measures.
“The government have given with one hand and taken much more with the other,” she told Today.
More about Resolution Foundation living standards Rishi Sunak Jeremy Hunt Rachel Reeves
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1/ 3Taxes up and income stagnating, think tank warns after Hunt Budget
Taxes up and income stagnating, think tank warns after Hunt Budget
Chancellor Jeremy Hunt gave workers a 2p national insurance cut on Wednesday
PA Wire
Taxes up and income stagnating, think tank warns after Hunt Budget
Rachel Reeves accused the chancellor of giving with one hand and taking ‘much more’ back with the other
PA Wire
Taxes up and income stagnating, think tank warns after Hunt Budget
Chancellor Jeremy Hunt (Kirsty Wigglesworth, PA)
PA Wire
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