Households face ‘dismal’ rise in spending power, says IFS

Households face a “truly dismal” increase in disposable income following the budget, the Institute for Fiscal Studies (IFS) think tank said.

Average disposable income is expected to rise by “just” 0.5% a year over the next five years, according to the government’s official forecaster.

National Insurance will also be increased as a result of the cap on salary sacrifice pension payments and freezing tax thresholdsIFS director Helen Miller said she considered this a “breach of the manifesto”.

Sir Keir Starmer told the BBC his party had “made a number of commitments that we hold in our manifesto”.

Ahead of last year’s general election, Labor promised not to increase taxes on “employees”, including National Insurance, Income Tax and VAT.

The Prime Minister acknowledged asking “everyone to contribute” and said it was “fair and necessary”.

“I definitely wanted to try and reduce the cost of living because for most people…that’s going to be the most important thing.”

Ms Miller said the growth in disposable income, which measures the amount of money people can spend after taxes are paid, was disappointing “especially compared to the more than 2% a year growth we achieved in every parliament from the mid-1980s to the mid-2000s”.

According to the IFS, average disposable income per person is expected to rise by around £104 per year over the next four years based on current inflation forecasts.

“Before this Budget, the UK was facing lackluster economic growth, stagnant living standards and dizzying fiscal pressures,” Ms Miller said.

“The same thing is true after this budget.”

His comments were also supported by the Solution Foundation think tank, which predicted that the rise in living standards in this parliament would be the second worst in history.

In her Budget, Chancellor Rachel Reeves chose to extend the freeze on income tax thresholds for a further three years beyond 2028. It also introduced a £2,000-a-year cap on the amount put into pensions from 2029. salary sacrifice arrangement Before National Insurance payments are due.

Reeves also denied the Budget had failed to deliver on the manifesto’s promises, but acknowledged its policies would have “an impact on working people”.

He told the BBC that contribution had been kept “to a minimum” due to other changes such as increased taxes on online gambling, properties worth more than £2 million and income from dividends or property rentals.

The Chancellor also highlighted other measures aimed at lowering the cost of living, including freezing NHS prescription charges and regulated rail charges in England and removing green taxes added to energy bills.

Asked whether he would apologize for breaking his promise not to increase taxes on working people, Reeves said he had made “fair and necessary choices” to reduce NHS waiting lists, lift children out of poverty and reduce the cost of living.

As the Budget approached, there was much speculation about the UK’s finances, the outlook for the economy and how the Chancellor faced major gaps in meeting fiscal rules on borrowing, causing uncertainty in financial markets.

Quoting the budget analysis, Ms Miller said the OBR’s “overall forecast rating was minimal” and that there was “no major financial repair work to be done”.

In an interview with the BBC, he also said the government was ignoring its number one mission to boost economic growth.

“We shouldn’t expect every Budget to solve all our problems, but it’s reasonable to expect a government that cares so much about growth as its number one mission to do more to boost growth,” he said.

Ms Miller said Reeves could reform the tax system to stimulate the economy and that the government also had “tough work” to do in areas such as competition policy, regulation and education.