Image Source: Yorkshire Evening Post
A think tank called the Institute for Fiscal Studies (IFS) said that the UK has moved into a “new era” of higher taxes.
Its director, Paul Johnson, said that middle-income people were “in for a shock” because taxes were going up and prices were going up even faster.
In his Autumn Statement, the chancellor said that taxes would go up to help fix the government’s finances. As well as help people pay their energy bills.
In its plans analysis, the IFS said that the most difficult decisions about cutting spending had been put off until after 2024.
Friday, the Chancellor, Jeremy Hunt, said that “tough times are ahead.” But he said his plans gave people “certainty” about how the government would help them.
But Mr. Johnson of the IFS said that living standards were about to take their “biggest drop in living memory.” Because of slow economic growth, an aging population, and a lot of borrowing by the government in the past.
The OBR, independent of the government, said on Thursday that the UK was in a recession and the economy would shrink next year.
Mr. Johnson said that the economy was ” grim ” and that it would be “several decades” before taxes went back to where they were before the pandemic.
Plans announced on Thursday would raise taxes by about £25 billion.
Mr. Johnson said that people with middle incomes would be hurt the most because the government couldn’t help them.
Based on the think tank analysis, energy bills for homes will be £900 more per year than they are now. This is because after the price cap on energy goes up in April and without the £400 rebate this year.
How citizens have reacted to higher taxes
Daniel Cooke, who has three kids, told the BBC that he wouldn’t get extra help. But to make ends meet, he has already had to get a second job delivering takeout in the evenings.
In the Autumn Statement, the chancellor said that tax thresholds would be frozen for another two years until 2028. This means that the point at which you start paying tax stays the same and doesn’t go up with inflation. So as wages go up, people will pay a more significant share of their income in taxes.
Taxes will go up in April, but almost all spending cuts will only happen after the next general election, likely in 2024. Some parts of the Conservative Party were not happy about this.
Former business secretary Jacob Rees-Mogg asked the chancellor to look at more ways to cut government spending before raising taxes.
But Mr. Hunt defended his plans
He also denied that the announcements were a “raid on working people.” And said they couldn’t raise £25 billion by “focusing on a small group of rich people.”
As well as raising taxes on people with average incomes. He said he plans to “look after the most vulnerable” by giving pensioners, people on means-tested benefits. And people with disabilities extra money to help them pay their rising bills.
The IMF also liked how the Autumn Statement balanced the need to bring prices down and keep the economy growing. And protect people’s incomes when the economy is in bad shape.
The IFS study also found that by 2028, average households will be 30% worse off than they are now. More than they would have been if incomes had kept going up like they were before the financial crisis of 2008.
Its results agreed with the Resolution Foundation, a think tank that works to help people with less money.
The Resolution Foundation said that the chancellor’s economic plans would pressure the “squeezed middle” even more. The middle class will have their income cut by 3.7% for good.
It also said that it didn’t think the budget cuts proposed on Thursday would be possible. They would have to keep wages in the public sector below those in the private sector for years.