The Chancellor's U-turn on his plans to axe the 45p tax rate will do little to ease the pressure on the UK's public finances, think tank experts have warned.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), said the about-turn on Kwasi Kwarteng's decision to scrap the 45% rate on earnings over £150,000 is the "smallest part" of the mini-budget, representing around £2 billion of the £45 billion in tax cuts.
He warned the move will not prevent the Government from putting the UK's already creaking public finances on an "unsustainable footing".
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He tweeted: "From a fiscal point of view, important to remember cut to 45p rate was just about smallest part of the mini budget. What was a £45 billion tax cutting package is now a £43 billion package. This U turn has, in itself, essentially no effect on fiscal sustainability."
Finance experts are now warning low income families face a real-terms cut of £1,000.
Sarah Coles of Hargreaves Lansdown told the ECHO: “The Truss tax U-Turn was more about politics than personal finances. It doesn’t save enough cash to make a material difference to the government finances. It means those on the lowest incomes will still be paying a huge price for tax cuts."
She added: "The government has refused to confirm that other benefits will be uprated by September’s inflation rate when they are reviewed in April. The idea is that it will mean having to borrow less in order to fund tax cuts – and keep international bond investors on side.
"If it chooses to raise benefits by wage inflation rather than CPI, those who rely on benefits to make ends meet could see half the rise they were expecting – at around 5% instead of around 10%. It’s a huge real-terms cut. The Resolution Foundation has calculated the cost at £1,000 for low income family with two children."
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