Households to be £1,900 poorer, says think tank

Families will be £1,900 poorer at the end of this parliament compared with the beginning, a think tank has said.

The Resolution Foundation said this government would set a "grim" new record for living standards going down.

It also said Chancellor Jeremy Hunt's Autumn Statement changes, including a National Insurance cut, handed the next parliament "implausible" cuts to public sector spending.

But Mr Hunt said the tax cuts would put "more money in people's pockets".

Responding to the Autumn Statement, the Resolution Foundation said that with the next general election due within the next year, "this parliament is on track to be the first in which real household disposable incomes have fallen".

The independent think tank, which focuses on improving living standards for those on low to middle incomes, said Mr Hunt's plans "failed to end a wider economic stagnation".

It said people's purchasing power had been stagnating for 20 years, and that recent pay rises just reflected the reality of higher inflation.

Despite "tax-cutting rhetoric" and about £20bn of tax cuts announced in the Autumn Statement, there had already been £90bn of tax rises announced by the government - so taxes are rising by the equivalent of £4,300 per household between 2019-20 and 2028-29, the think tank said.

The chancellor managed to make these cuts at the expense of not raising public spending in line with the pace of general price rises, meaning departments such as justice, local government and the Home Office face a £17bn budget cut by 2027-28, it added.

The Office for Budget Responsibility (OBR), the government's independent economic forecaster, said that the amount of tax households pay would go up in general.

Richard Hughes, the chair of the OBR, said the tax burden was going up "to its highest level in the post-war era".

"Over the medium term, the combination of higher inflation and frozen tax thresholds means that the tax burden for this country is going up," he said.

The chancellor was able to cut certain taxes because he hadn't changed public services spending plans.

This means that government departments will face a cut in spending power of about £20bn, Mr Hughes said.

"That's roughly equal to the amount of money the chancellor has given way in tax cuts," he said.

Speaking to the BBC on Thursday, Mr Hunt said: "Taxes have gone up, but I want to start bringing them down."

He said the government had been right to help families during the coronavirus pandemic with the furlough scheme, and with energy bills during the cost of living crisis.

He added that tax rises were not long-term and that after the National Insurance cuts, "there's going to be more money in people's pockets".

Mr Hunt said he had chosen to cut National Insurance to get more people into work, and that the measure would help fill one in 10 job vacancies.

He said he did not know whether real incomes would be down, but that the pandemic and the effects of Russia's war in Ukraine had had an impact.

But he said the government plans to boost the economy by making business more competitive.

"If we want to bring the tax burden down, we have to grow the economy," he added.