Millions of low-income households face “real pain” due to Rishi Sunak hiking taxes as costs rise and his refusal to reverse the cut in Universal Credit, a leading economic think tank has warned.
The Institute for Fiscal Studies said earnings would barely go up for five stagnant years and warned of hardship for ordinary people as they get hit by the 1.25 per cent hike in national insurance and rising inflation.
The comprehensive Budget analysis was in sharp contrast to the Chancellor’s upbeat tone as IFS director Paul Johnson said voters “may not get much feel good factor”.
Johnson said high inflation, rising taxes and poor growth “undermined more by Brexit than by the pandemic” would hit home until 2025.
The respected director of the IFS said welfare payments will rise by around three per cent, while inflation could be five percent leaving millions of people worse off.
He said: “That will be a real, if temporary, hit of hundreds of pounds a year for many benefit recipients.”
With the possibility of inflation hitting the highest level in three decades, Johnson warned that “millions will be worse off in the short term”.
He added: “Over the next several years a combination of tax increases and high inflation will mean very slow growth in living standards.
“A middle earner is likely to be worse off next year than this as high rates of inflation and tax rises more than negate small average wage increases.
"This of course comes on top of a decade of historically feeble increases in real incomes.
"The gap between what we might have expected on the basis of pre financial crisis trends and what is actually happening is staggering. Average gross earnings could have been some 40 per cent higher had pre crisis trends continued. “
Johnson said: “We are not at 1970s levels of inflation, but we are now experiencing enough inflation that real pain will be felt as low income households – most of whom have next to nothing in the way of financial assets – wait more than a year for their incomes to catch up. For some in work that may never happen.”
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