Chancellor Kwasi Kwarteng is to deliver the biggest package of tax cuts since the Thatcher years by replacing National Insurance and increasing corporation tax, according to the Institute for Fiscal Studies (IFS).
But Britons as a whole are still facing a “significant rise in tax” from the decisions made in recent years, with many people still paying 40 per cent of income tax.
Despite Liz Truss’ push for economic growth, UK GDP has been in for “a very bad few years” as inflation has caused “random” cuts to public services, the IFS said.
The Prime Minister’s Budget statement on Friday will confirm the Prime Minister’s pledge to reverse this year’s 1.25 percentage point National Insurance rise and replace the planned corporation tax rise in 2023.
Although these changes are a return to the situation as it was before April, they will create an estimated £ 30 billion hole per year in the general economy, as the Treasury was planning based on the increase in income received from two samples.
Paul Johnson, head of the IFS, said: “This will certainly, in our view, be the biggest fiscal event of tax cuts since Nigel Lawson’s 1988 budget.”
However, the think tank pointed out that the overall tax burden will remain higher than in previous years, partly because of Rishi Sunak’s decision to freeze the rates that workers pay at the base and higher rates of income tax, instead would increase them. in line with inflation.
Researcher Xiaowei Xu said, “The long-term impact of the tax and social measures introduced by the last government is a sharp increase in taxes, which are mostly borne by high-income families. »
In a few years, 14% of all adults will pay the top tax, which is a higher proportion than before.
Despite higher taxes and more support to finance energy bills, families will be worse off this year due to the impact of inflation.
Ms Xu said: “On balance, we expect the median income to be below £500 last year, representing a net decline of around 3% in income.
“People on high incomes – but not the highest earners – will be over £1,000, which will be a big increase. People on low incomes and the unemployed will be well protected from the increase in living standards, whether it is cash and a percentage of income.
“Even after the government spent a lot of money to protect families from rising costs of living, most families will still see their standard of living fall this year compared to last year.”
The IFS has predicted “a very bad few years” for growth, with the economy five per cent weaker than forecast in the last budget.
It is expected to put pressure on public services due to rising costs, estimated at £18billion a year, and think tank Isabel Stockton suggested this would be ‘a bit of a risk of course’. to be cut’ because different departments in Whitehall will be affected differently.
Source : nouvellefr.com