Households will get poorer and pay more tax over the coming years, a think tank projects
Real wages in the UK will not return to their 2008 level until 2026 despite an easing of inflation, the Resolution Foundation, an independent think tank, reported this week in its analysis of the new budget.
According to the report, the country is on track for a “disastrous decade” of stagnant incomes and high taxes, with cuts to public services.
The publication highlighted that real wages fell at an annual rate of 3.9% in January, noting that the bigger picture for wages is “one of long-term pay stagnation.”
The decrease in household disposable incomes this year and next are the worst in a century, the think tank stressed.
“Britain’s economy remains stuck in a deep funk – with people supported into work but getting poorer, and paying more tax but seeing public services cut,” it wrote.
The UK is forecast to have gone through “the biggest energy and inflation shock since the 1970s, while avoiding a recession, with unemployment peaking at just 4.4%,” Resolution Foundation added.
According to the study, taxes as a share of GDP are expected to hit 37.7% by the end of the forecast period, representing a 70-year-high and a 4.7% increase since 2019-2020.
The freeze on income tax thresholds since 2022-23 means that typical households will be worse off by £1,110 ($1,337) by 2027-28 when the freeze ends, it noted.
Torsten Bell, chief executive of the Resolution Foundation, stated that “Jeremy Hunt’s first budget was a much bigger affair than many expected, combining improvements to the dire economic and fiscal outlook with a significant policy package aimed at boosting longer-term growth in general, and the size of the workforce in particular.
“But stepping back, the UK’s underlying challenges remain largely unchanged. We are investing too little and growing too slowly. Our citizens’ living standards are stagnant. We ask them to pay higher taxes, while cutting public services,” he concluded.
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