Millions ‘worse off’ in rising costs and taxes

ECONOMISTS have warned that millions of people will be worse off due to rising costs and tax increases as the Chancellor’s Budget came under intense scrutiny.

The Institute for Fiscal Studies (IFS) said the poorest face “real pain” and middle earners will lose out.

Rishi Sunak had claimed it was a strategy to “usher in a new age of optimism”, but the leading economic think tank warned the public “may not get much feelgood factor”.

Instead IFS director Paul Johnson said living standards for many will fall with high inflation, rising taxes and poor growth being “undermined more by Brexit than by the pandemic”.

His warning came as the Resolution Foundation said the poorest fifth will be around £280 a year worse off despite the Chancellor softening the blow of his Universal Credit (UC) cut.

Researchers at the living standards think tank said three-quarters of households on the welfare scheme will be worse off despite the new tapering rules announced in the Budget.

Taxes will reach the highest level since the post-war recovery in 1950 and be £3,000 higher for the average UK household compared with when Boris Johnson became Prime Minister in 2019, they added.

That was coupled with a forecast that the weakest decade of pay growth since the 1930s, combined with rising inflation, means wages are set to fall again next year.

Mr Sunak insisted that it remained his “ambition” to “lower taxes for people” and insisted he had to take “corrective action” as a result of the coronavirus pandemic.

IFS director Paul Johnson said there will be a “real, if temporary” hit of hundreds of pounds a year for benefits recipients as welfare payments will rise by around 3%, while inflation could be 5%.