Economists say poorest families will suffer from budget spending

The living standards of low-income workers and disadvantaged families could stabilize due to measures announced in the budgetThe government has been warned.

Some of the biggest tax hikes announced in the Budget Ministers have been told that, including increases in employers’ National Insurance contributions (Nics), this could impact low-income workers and vulnerable people.

Chancellor Rachel Reeves and Prime Minister Sir Keir Starmerinsist that they are not raising taxes on ordinary “working people” but instead focusing on business.

But that was rejected by economists, who argued the tax changes would hit low-income people, who could face fewer job opportunities and weigh on wage increases.

Former Labor Party leader Jeremy Corbyn also said the Budget was “keeping children in poverty” and relied on “soft managerialism” rather than radical policies to tackle inequality.

Following the new government’s first budget, an independent forecaster predicted that three-quarters of the cost of the Nix rise would be passed on to people through lower real wages by 2026-27 due to a combination of wage cuts and price rises. .

The Office for Budget Responsibility (OBR) also warned that the measure could also lead to the loss of an estimated 50,000 average-hour jobs.

James Smith, research director at the Resolution Foundation, an economic think tank, said the Knicks’ rise “will definitely have an impact on wages.” He said it was a “tax on working people” because it would stop wages from rising.

The think tank added that the forecast for living standards was “stagnating” after the budget, adding that the outlook for real wages had worsened.

Household incomes will rise by an average of 0.5 percent over this parliament, just a fraction above the previous parliament’s record low growth of just 0.3 percent, the Resolution Foundation said.

And there are concerns that the average increase may be masking a serious decline among the poorest families.

The Chancellor has increased taxes by £40 billion and adjusted fiscal rules to allow more borrowing.

Labor says it is being done to plug a £22 billion black hole in the country’s finances that it claims the Tories have left. Conservatives deny this.

Reeves suggested raising taxes was not an easy choice, telling BBC Radio 4’s Today programme: “Look what the alternative was? We had a £22 billion black hole in public finances.”

She also invested £25 billion into the NHS and allocated an additional £6.7 billion for school buildings.

Sir Keir Starmer said the government had “acted responsibly” over the budget by taking “tough, difficult decisions”.

He told broadcasters: “We had to do what was responsible to fix the foundations and rebuild our country.
“As I think everyone will understand, we have inherited a £22 billion black hole, money that was not accounted for by the previous government. I’m not ready to just move past this, we have to fix this.

“So we did the responsible thing.”

The Prime Minister stressed that the budget includes investment in the National Health Service, schools and housing.

He added: “So, yes, these are difficult decisions, but we have cleared them, we have made difficult, difficult decisions now, and I think all or many people will agree that health care, education and housing, and issues like that, like these are really important things that our country should strive for.”

Meanwhile, the International Monetary Fund, in an unusual move, backed the budget, saying: “We support the planned deficit reduction over the medium term, including through sustained increases in revenue.”

Isaac Delestre, a research economist at the Institute for Fiscal Studies, said larger employers with more low-wage workers would be hit hardest by the rise of Nics.

“Ultimately, there will be people who will bear the cost of paying this tax – either business owners due to lower profits, consumers due to higher prices, or workers due to lower wages,” he said .

He said the OBR estimated that 61 per cent of the impact would be felt on wages, 15 per cent from higher prices and 24 per cent from lower profits.

“Overall, you would certainly expect this to result in a reduction in overall work volume, whether through hiring net workers or through existing workers working fewer hours,” he said.

The Resolution Foundation also warned that the failure to link Local Housing Benefit to rent next year would lead to a widening gap between benefits and housing costs.

Benefit claimants who rent in the private sector rely on the benefit to subsidize housing costs, but the decision to freeze the amount until next year will leave many tenants struggling to meet rising rent demands.

The National Association of Residential Landlords said the benefits freeze would “make it more difficult for those claiming benefits to access tenancies in the rental sector and maintain tenancy conditions.”

Corbyn, a former Labor Party leader and now an independent MP, criticized the failure to scrap the two-child benefit cap and criticized the government’s announcement that it would continue to save the Tories on welfare by changing disability and sickness benefits.

The Chancellor confirmed she would continue cuts of up to £3 billion through “fundamental reform” of disability benefits, but did not specify what the changes would be.

“We will not solve the crises we all face with soft managerialism. The Government would have us believe that this is the best they can do in the circumstances, but that is because they do not understand what lies at the heart of the problems we face: grotesque inequality,” said Corbyn, MP for Islington North. I.

“We must tax the richest to invest in our communities. Instead, the government is trying to convince us all that it is perfectly normal for 4.2 million children to live in poverty in the world’s sixth largest economy.”

The charity Save the Children said it was a “mistake not to remove the two-child benefit cap” – and called for a “lockdown” on child benefits to ensure they rise in line with income or inflation.

Becca Lyon, head of child poverty UK, said failure to lift the cap “means 1.6 million children in large families will continue to suffer the consequences of having less money for food, clothing, toys and books.”

The Government has announced a “fair repayment rate” for Universal Credit claimants who are in debt, to cap the amount of their benefits that can be paid back through repayment.

Carer’s Allowance was increased by £45 a week to £196, and Work and Pensions Secretary Liz Kendall confirmed working-age benefits would rise by 1.7 per cent next year.

The Department for Work and Pensions also confirmed plans for a £240 million package to overhaul jobcentre support, promising to shift the government’s “focus from welfare to work”.

Kendall said: “We promised change and that’s what we will deliver.”

She added: “This Budget shows the first steps in our plan to expand opportunity and reduce poverty in every corner of the country. There is still a lot to be done, but this budget shows that change has begun.”

The Chancellor acknowledged that the Nix rate hike could impact wage growth for private sector workers.

Asked about the consequences of the move, the Chancellor told BBC Breakfast: “I said there would be consequences. This will mean that businesses will have to absorb some of this gain through profits, and it will likely mean that wage growth may be slightly lower than it would otherwise be.”

Shadow Chancellor Jeremy Hunt told Sky News: “As much as Labor tries to argue that its tax rises won’t hurt ordinary families, the OBR and the Institute for Fiscal Research say it will mean lower pay, lower living standards, higher inflation, higher mortgages – so it’s a very sad day for ordinary families.”