Lack of support will push 1.3 million people into poverty, economists warn Business News

About 1.3 million Britons will be pushed into absolute poverty by the cost of living squeeze, after the Chancellor failed to offer more support for low-income households in his spring statement, the Resolution Foundation has said , an economic think tank.

This is the first time, outside of a recession, that poverty has risen so sharply. Wages are failing to keep pace with inflation, which is expected to peak at over 8% next month and average 7.4% this year. The spike in the cost of living comes as taxes are also set to rise in April. About half a million children will be among those pushed into poverty by this pressure on households, the think tank said.

“The decision not to target aid to those hardest hit by rising prices will leave low and middle income households painfully exposed, with 1.3 million people, including half a million children, who are expected to fall below the poverty line this year,” said Torsten Bell, chief executive of the Resolution Foundation.

Typical household incomes are expected to fall by 2% by 2025

(Resolution Foundation)

The average working family is set to lose £1,100, a 4% drop in income over the next financial year, analysis of the Chancellor’s Spring Statement showed. The picture is more extreme for the poorest quarter of households, which will see 6% of their income wiped out by rising costs and taxes.

While the Chancellor emphasized tax cuts in his speech, raising the National Insurance contribution threshold and promising to cut income tax by a penny before the next election, only one in eight workers will actually see their tax bill drop by 2025. .

“Despite the eye-catching 1p income tax cut, the reality is that the Chancellor’s tax changes mean that seven out of eight workers will see their tax bill rise. These tax hikes mean the Chancellor is able to signal rapid fiscal consolidation and significant leeway over her fiscal rules,” Mr Bell said.

It is also the worst parliament on record in terms of falling living standards, the Resolution Foundation said, with household incomes expected to fall 2% through 2025, double that seen during the financial crisis.

“Faced with a cost of living crisis that is set to make this Parliament the worst on record for household incomes, the Chancellor came to the news box yesterday promising cost of living support today and tax cuts tomorrow. Significant measures have been announced on both counts, but the policies do not match the rhetoric,” Bell said.

It comes after spending watchdog the Office for Budget Responsibility (OBR) revealed that UK consumers are facing the worst drop in purchasing power in a single financial year since records began in 1956 .

Energy bills are expected to rise by over 50% in April, but this will be compounded by a further increase of over £800 in October, pushing the average energy bill towards £2,800.

Paul Johnson, director of the economic think tank at the Institute for Fiscal Studies, said the Chancellor had ‘done nothing more for those who depend on benefits, the poorest, other than a small amount of extra money which local authorities may distribute at their discretion”.

Mr Johnson added: “Their benefits will only increase by 3.1% for the coming financial year. Their cost of living could well increase by 10%.

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This notice was published: 2022-03-24 08:13:48

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