According to the Resolution Foundation, the average household of working age will see their real income drop by 4% in the next year. This could lead to millions of people falling into absolute poverty, including 500,000 children.
About 1.3 million Brits will be pushed into poverty, including half a million children. Rishi Sunak‘s spring statement, a devastating analysis finds today.
The Resolution Foundation think tank said the typical working age household will see their real income fall 4% next year – a loss of £1,100.
The experts said: “The scale and distribution of the cost of living squeeze, coupled with the lack of support for low-income families, means that a further 1.3 million people are set to fall into absolute poverty next year, including 500,000 children – the first time Britain has seen such a rise outside of recessions.”
It said despite the tax cuts yesterday, the think tank said only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25.
And only those earning between £11,000 and £13,500 will pay less tax and National Insurance (NI).
Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and NI in 2024-25, the think tank said.
By 2027 earnings will be £11,500 behind what they would have been if they had continued growing on the pre-2008 path.
Torsten Bell, Chief Executive of the Resolution Foundation, said: “In the face of a cost of living crisis that looks set to make this Parliament the worst on record for household incomes, the Chancellor came to the dispatch box yesterday promising support with the cost of living today, and tax cuts tomorrow.
“Significant measures were announced on both counts, but the big picture is that policy does not measure up to the rhetoric.
“The decision not to target support at those hardest hit by rising prices will leave low-and-middle income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.
“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’The tax changes will cause seven-in-eight workers to see their taxes rise due to the tax changes. These tax rises allow the Chancellor of Germany to point out a quick fiscal consolidation and significant headroom to his fiscal rules.
“The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead.
“Whether that will be sustainable in the face of huge income falls to come remains to be seen.”
