Yahoo Finance UK households ‘to lose £1,900’ after Jeremy Hunt’s autumn statement
UK households are set to be £1,900 poorer at the at the end of this parliament compared to the beginning, according to the Resolution Foundation.
The think tank, which focuses on improving living standards for those on low to middle incomes, also warned that the UK is facing a “grim new record on living standards.”
The Resolution Foundation said that “this parliament is on track to be the first in which real household disposable incomes have fallen (by 3.1% from December 2019 to January 2025)” and “households will on average be £1,900 poorer at the end of this parliament than at its start”.
Here's the graph that backs this up. Ouch. https://t.co/i3VTsxY9UI pic.twitter.com/C4cHm4c114
— Ben Riley-Smith (@benrileysmith) November 23, 2023
Torsten Bell, chief executive of the Resolution Foundation, said: “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.”
Read more: What the autumn statement means for your finances
The top fifth will gain £1,000 on average, five times the gains seen by the bottom 20%, who will be only £200 better off from measures that include a 2% cut in national insurance, according to the Resolution Foundation’s analysis.
The Institute for Public Policy Research (IPPR), another think tank, had a similar analysis. For every £100 Jeremy Hunt spent on personal tax cuts, £46 will benefit the richest fifth of households. Only £3 of every £100 of tax cuts will go to the worst-off families.
The Institute for Fiscal Studies (IFS) calculated that any gains from cutting national insurance would be wiped out by frozen tax thresholds.
“The 2% cut to national insurance means £449 less tax paid by an average full-time employee, but this is almost entirely offset by frozen thresholds and other changes since 2021,” it said.
The think tank also said that pensioners are paying more income tax than 13 years ago.
Read more: Autumn statement key highlights
A pensioner earning £25,000 a year is now paying about £400 more in income tax than they did in 2010.
Paul Johnson, director of the IFS, said: “Back in 2010 around half of pensioners paid any income tax. Now more than two thirds do.”
The Office for Budget Responsibility (OBR), the government's independent economic forecaster, said that the amount of tax households pay would go up in general.
Richard Hughes, the chair of the OBR, said the tax burden was going up "to its highest level in the post-war era". He warned that Hunt’s spending plans suggest there will have to be “sharp cuts” to some public services in the years ahead.
Read more: What the autumn statement it means for your pensions
IFS director Johnson said: “The chancellor has pencilled in numbers that suggest he really wants to try to wrestle the size of the state back down towards where it was in 2019. Given the demands of servicing our debt, and presumably paying for more healthcare and pensions, achieving that will require sharp cuts in many areas of public spending.”
Government departments will face a cut in spending power of about £20bn, according to the OBR chair.
Meanwhile, the chancellor has defended his budget and the controversial claim that it delivers the biggest tax cut in 35 years.
Hunt denied that it is fundamentally dishonest of the Tories to claim it is the largest tax cut ever for workers when the tax take is rising.
Asked, the chancellor told BBC Radio 4’s Today programme: “I fundamentally disagree with that.”
He said “of course” taxes were going up “so we can pay down our COVID debt”. Hunt added: “But yesterday I did make a start in bringing down the tax burden. I’ve never said that we were going to get there all in one go.”
Watch: Chancellor denies tax cuts were 'pre-election giveaway'
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