It’s hard to overstate the scale of the cost of living crisis that’s coming. The highest inflation in 40 years and the worst income squeeze on record lie ahead of us.
While household finances are taking a hammering, the public finances have actually been on the up: we’re all paying more taxes than the Government expected.
Using that headroom, the Chancellor today prioritised rebuilding his tax cutting credentials over support for the low-to-middle income households hardest hit.
A 5p cut to fuel duty will save the typical driving households £75 a year, but only reverse 13 per cent of the increase in pump prices over the past year.
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An increase in how much you can earn before you start paying National Insurance will be welcome relief for many, but middle and top income households will gain the most.
In fact only £1 in every £3 of new support goes to the poorer half of families.
Giving councils £500m to provide emergency support to people struggling just isn’t enough when benefits will fall £11bn next year in real terms. Absolute poverty will rise.
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Promising an Income Tax cut for 2024 also can’t hide the fact that taxes are going up not down. Tax receipts as a share of the economy are set to reach their highest level since 1982-83 – we’re talking the equivalent of a £3,000 rise per household since the 2019 election.
Today the Chancellor announced a bigger policy package than expected, but it was badly designed.
Cutting Income Tax (which those with unearned, as well as earned, income pay) while raising National Insurance (that only workers cough up for) makes no sense - 21st Century Britain is already doing enough to hurt workers and help landlords.
And almost no new support for the poorest households is indefensible, when we all know that incredibly difficult times lie ahead.
