Households will be £1,900 worse off on average by the end of this Parliament, grim analysis shows.
Economists warned this Parliament is on track to be the first which has seen people's disposable incomes fall - from 3.1% in in 2019 to January 2025. The richest Brits are most likely to benefit from yesterday's Autumn Statement, which saw Chancellor Jeremy Hunt trumpet cuts to National Insurance that will likely be wiped out by Tory stealth taxes.
Analysis by the Resolution Foundation found the top 20% of Brits would gain £1,000 on average, five times the gains seen by the poorest fifth who only gain £200 from the plans. Around 40% of the gains from the tax and benefit measures announced in the Autumn Statement – including cuts to National Insurance, boosts to Local Housing Allowance and tougher rules for vulnerable benefit claimants – go to the richest fifth of the population, the think tank said.
Mr Hunt unveiled a pre-election giveaway yesterday, with bigger than expected cuts to National Insurance which he said would save the average worker around £450 a year. The main rate of National Insurance will be slashed from 12% to 10% from January - but the forecasters warned that the tax burden remains on course for a post-war high and many workers will not be better off due to previous tax changes.
All the tax and benefit measures announced in this Parliament mean the richest fifth of households are set to lose £1,100 on average, while the poorest gain an average of £700, the analysis found.
But the Resolution Foundation warned the Autumn Statement’s £20 billion of tax cuts compared to around £90 billion of tax rises since 2019. Despite Tory boasts about cuts, taxes are rising by 4.5 per cent of GDP between 2019-20 and 2028-29, equivalent to £4,300 per household.
Torsten Bell, Chief Executive of the Resolution Foundation, said: “Ultimately this reflects the pressures, not only of an upcoming election, but of governing a sicker, older, slower growing Britain, amidst an era of far higher interest rates.
“That might be difficult for policy makers, but it’s a disaster for households whose wages are stuck in a totally unprecedented 20 year stagnation. This parliament is set to achieve a truly grim new record: the first in which household incomes will be lower at its end than its beginning.”
Mr Hunt insisted that the tax cuts he announced yesterday were "the single biggest thing I could do for long-term growth". Speaking from the Airbus factory in north Wales, he told Times Radio that he opted for national insurance and business tax cuts because they "will make the biggest difference to our long-term competitiveness".
He said: "It's a fundamental Conservative principle that we think you need to grow the cake before you have discussions about how you cut it up. I can make a start - and that's what I did yesterday - in reducing the tax burden, but I've chosen to do it in a way that's going to grow the economy."