Tax rises, inflation set to deteriorate living conditions in UK: Think tanks
UK living standards might remain stagnant for the next few years due to hiking inflation and rising taxes, a leading research institute has warned.
The Institute for Fiscal Studies (IFS), a London-based economic research institute specialized in UK taxation and public policy, warned on Thursday that UK government’s recent budget statement represented a big shift towards higher taxation and spending, making the living situation harder for Britons.
“What we have had is a chancellor responding to the ever-increasing demands of the healthcare system on the one hand, and the increasingly dire plight of the likes of the justice, social care and prison systems, starved of funding for a decade, on the other,” IFS director Paul Johnson said.
Britain's budget forecasting agency, the Office for Budget Responsibility (OBR), warned that Wednesday's budget statement from Finance Minister Rishi Sunak would take public spending to its highest since the 1970s and see the tax burden rise to its highest since the 1950s.
The OBR also forecasts an average inflation rate of four percent next year, which is the highest rate for a calendar year since 2011, due to rising energy prices and skyrocketing supply chain issues.
Adding to the government’s future challenges, Moody's Investors Service, a bond credit rating company, has forecast that general government debt would remain near 100 percent of gross domestic product.
The IFS said the outlook for households' disposable income contradicts Sunak's promise of “a new age of optimism.”
“Voters may not get much feel-good factor. High inflation, rising taxes and poor growth, still undermined more by Brexit than by the pandemic, will see real living standards barely rising and, for many, falling over the next year,” the IFS's Johnson added.
According to the government’s plan, an increase in payroll taxes for workers and employers, which comes into action from April next year, will bring 16 billion pounds of annual revenue to fund health care and other public services.
Living standards in the UK have deteriorated since the 2008 financial crisis. The Resolution Foundation think tank assesses that genuine wages in 2024 will be just 2.4 percent higher than 2008, compared with a 36 percent increase in the 16 years prior to the financial crisis.
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