Budget: UK on track for ‘disastrous decade’ of
income stagnation
Taxes as a share of GDP are on track to reach a
70-year high but public services are being cut, says thinktank
Budget
2023: key points at a glance
Phillip
Inman
@phillipinman
Thu 16 Mar
2023 07.24 GMT
The UK
remains on track for a “disastrous decade” of stagnant incomes and high taxes,
despite cuts to public services, the Resolution Foundation said in its analysis
of the budget on Wednesday.
The
thinktank, whose stated aim is to improve the standard of living for low- and
middle-income families, said typical household disposable incomes were on track
to be lower by the end of the forecast in 2027-28 than they were before the
pandemic, when inflation is taken into account.
While the
chancellor had announced an “impressively broad suite of policies” to encourage
more people into work, he was unable to change the course of declining living
standards, the Resolution Foundation said.
“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,” the report
said.
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%”, it
added.
It said
taxes as a share of GDP were on track to hit 37.7% by the end of the forecast,
a 70-year-high and a 4.7% increase since 2019-20, the equivalent to nearly an
extra £4,200 for every UK household.
The rise in
taxes will still leave the chancellor with little room for manoeuvre at the end
of the Office for Budget Responsibility’s five-year forecast period, mainly
because a short-term lift in GDP growth will fade, leaving the overall tax rate
lower.
“If even
the slow growth of the past decade had continued, incomes would still be £1,800
higher than currently projected for 2027-28,” the thinktank said.
Torsten
Bell, chief executive of the Resolution Foundation, said: “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.
“No one
budget could turn that around, but it’s time Britain did.”
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