Chancellor Rishi Sunak will heap extra financial pain on households across the UK as he puts low tax conservatism to the sword.
Sunak’s wave of spending will lay the groundwork for a permanently more punitive tax regime that will intensify the cost living crisis, leaving Brits “worse off in the short term”, the Institute for Fiscal Studies (IFS) warned in their post-budget analysis today.
The two-pronged assault on households from inflation and tax hikes will result in “very slow growth in living standards,” Paul Johnson, director at the IFS, cautioned.
The government’s fiscal watchdog warned yesterday inflation could peak at 4.4 per cent by the middle of next year, compounding the hit to household incomes from higher taxes.
Liberal spending promises amounting to around £150bn announced by the Chancellor yesterday will steer the British economy toward higher taxation, with the tax burden set to swell to its largest level since the 1950s, according to the Office for Budget Responsibility.
As a result of higher taxes to fund a larger state, households’ tax bills will have increased by £3,000 by 2026/27 since Boris Johnson became prime minister in 2019, research by the Resolution Foundation found.
The tilt toward a more expansionary state prompted Torsten Bell, chief executive of the Foundation, to declare “it is the end of low tax conservatism”.
Businesses and households will shoulder around 80 per cent of the heavier tax burden, according to the IFS.
“Mr Sunak has bowed to the demands created by public services which have suffered a decade of cuts,” Johnson added.
The Chancellor raised nearly every government department’s budget this week, wholly financed through tax hikes to ensure he kept within new tighter fiscal rules.
However, the Chancellor’s spending pledges were “almost entirely… unrelated to the pandemic,” Johnson added, instead stemming from growing demands on the NHS caused by Britain’s ageing society.