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Higher taxes: IFS says could become normalized

Higher Taxes

Image Source: Yorkshire Evening Post

The UK has moved into a “new era” of higher taxes, according to the Institute for Fiscal Studies (IFS).

Its director, Paul Johnson, said that people with middle incomes were “in for a shock” because taxes were going up and prices were going up even faster.

The chancellor said in his Autumn Statement that higher taxes would help fix the government’s finances and make it easier for people to pay their energy bills.

In its plans analysis, the IFS said that the most challenging decisions about cutting spending would have to be made after 2024.

Friday, Jeremy Hunt, the Chancellor, said, “Tough times are ahead.” But he said his plans gave people “certainty” about how the government would help them through the recession.

But Mr. Johnson of the IFS said that living standards were about to take their “biggest drop in living memory.” Because economic growth has been slow, and the government has borrowed a lot in the past.

Thursday, the independent OBR said that the UK was in a recession and the economy would shrink next year.

Mr. Johnson said that the economy was “grim” and that taxes would not return to where they were before the pandemic.

Plans announced on Thursday would raise taxes by about £25 billion.

What higher taxes mean

Mr. Johnson said middle-income people would be hurt the most because the government couldn’t help them.

According to the analysis by the think tank, home energy bills will be £900 more per year than they are now. This is because the energy price cap is going up in April, and there is no £400 rebate this year.

Daniel Cooke, who has three kids, told the BBC that he wouldn’t get any more help. But he already has a second job delivering takeout in the evenings because he needs the money.

The chancellor said in the Autumn Statement that tax thresholds would stay the same for another two years until 2028. This means that the point at which you start paying taxes stays the same and doesn’t go up with inflation. People will pay a more significant share of their income in taxes as their wages go up.

In April, taxes will go up, but almost all spending cuts will only happen after the next general election, which will likely be in 2024. Some parts of the Conservative Party were not happy about this.

Former business secretary Jacob Rees-Mogg asked the chancellor to look into more ways to cut government spending before raising taxes.

Chancellor Hunts defends his plan

He also said that the announcements were not a “raid on working people” and that £25 billion couldn’t be raised by “focusing on a small group of rich people.”

In addition to raising taxes on people with average incomes. He said he plans to “look after the most vulnerable” by giving pensioners, people on means-tested benefits. And people with disabilities more money to help them pay their rising bills.

The IMF also liked how the Autumn Statement balanced the need to lower prices to keep the economy growing. And protect the incomes of people when the economy is terrible.

The IFS study also found that by 2028, average households will be 30% worse off than they are now. More than they would have been if incomes had kept going up as they did before the financial crisis of 2008.

The Resolution Foundation, a think tank that works to help people with less money, agreed with its findings.

The Resolution Foundation said the plans for the economy would pressurize the “squeezed middle.” As a result, the middle class will lose 3.7% of their income forever.

Read Also: The UK sees biggest fall in living standards

It also said that it didn’t think the budget cuts proposed on Thursday would be possible. They would have to keep public sector wages lower than private sector wages for a long time.

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