7 minutes ago
About sharing
The UK faces nearly 20 years of lost pay growth, a think tank which focuses on low and middle earners says.
The Resolution Foundation said that, after taking account of rising prices, the average wage will not regain its 2008 level until 2026.
The body also said that Wednesday’s Budget will mean a net tax cut of £9bn is taking effect in an election year.
However, it also said pensioners had been the big losers from tax changes during this parliament.
The Resolution Foundation’s analysis of the Budget found that despite the government’s official forecaster cutting its for forecast for inflation – the rate at which prices rise – real average wages faced “a staggering near-two lost decades of pay growth”.
It said that if pay had continued to grow at the same pace seen before the 2008 financial crisis, the average worker in 2023 would have been around £14,000 better off.
The foundation also said that while measures announced in the Budget meant a net tax cut of £9bn in 2024, that was dwarfed by an estimated £27bn of tax rises that came into effect last year – and a further £19bn coming in after the election.
The Budget saw the chancellor cut National Insurance by 2p in the pound, and also included increases to child benefit salary thresholds.
The Resolution Foundation calculates that four-fifths of employees will pay less tax in the coming year, with an average gain of £450. But taxpayers earning £19,000 or less will be worse off because, as more of their pay is dragged above the frozen tax-free allowance of £12,570, they will lose more than they will gain from rate cuts.
It said that while more than three-quarters of the personal tax cuts announced in Wednesday’s Budget go to the richest half of households, there is a different picture when all the tax and benefit policies announced in this parliament – starting in 2019 – are analysed.
“Middle earners have come out on top, while taxpayers earning below £26,000 or over £60,000 will lose out. The biggest group of losers are pensioners, who face an £8bn collective hit,” said Torsten Bell, chief executive of the Resolution Foundation.
“Looking at all policy changes announced this parliament reinforces the sense that the government has reversed course from the approach that dominated during the 2010s. Back then, support was focused on pensioners and takeaways on poorer, younger households. This time it is those aged over 65 and on the highest incomes who are set to lose most.”
Related Topics
18 hours ago
3 minutes ago