The Institute for Fiscal Studies (IFS) has warned that Britain faces the "worst decade for growth in household incomes on record", in a hard-hitting analysis of Chancellor John Healey's first Budget.
Helen Miller, director of the IFS, delivered the assessment a day after Mr Healey presented his Budget to Andy Burnham's Government. She said that "no amount of temporary cost of living packages" will fix the poor growth in incomes, adding: "We need a stronger economy."
Spending Plans Under Scrutiny
Ms Miller criticised Mr Healey for "a lot of small, unhelpful fiddling with the tax system" and put the Government's spending plans under the spotlight. She said the present plans imply "some public services will see real-terms cuts in next year's spending review", and avoiding these could require a "top-up of £17billion in 2030-21".
She said she is "sceptical" the Government was willing to make such cuts, adding: "When Chancellors pencil in tight spending plans in the future, they tend not to deliver."
Defence Spending Concerns
In a further criticism of Mr Healey, who quit as Sir Keir Starmer's Defence Secretary in protest at military under-funding, she said she was "no wiser" about how he plans as Chancellor to get defence spending up to 3% of GDP by 2030, "let alone to 3.5% by 2035".
She added she was "grumpy" that he had chosen to use reserves to partially fund the Defence Investment plan to get spending to 2.7% of GDP next year. "This is categorically not what the reserves are for," she said. "Drawing down reserves is another way that the government has reduced its buffer against future shocks."
Energy Payments and Tax Changes
Commenting on the £100 payment to help with energy costs for households in band A-D properties, she said: "The key choice was to give a relatively small payment to around 80% of households, rather than a larger payment targeted on a smaller group. Alongside other temporary measures, it will help households over winter. But winter is coming and it still looks tough for many families across the country."
Ms Miller was "disappointed to see yet another tax increase on landlords" and said the further "tinkering with business rates" is "getting tiresome". She described the new "founders' relief" to encourage entrepreneurs as "bonkers", saying it looks "like yet another tax break for a chosen group with little economic reasoning behind it".
She added: "We have a tax system that is a mess." Energy taxation, she claimed, "is a hodgepodge that creates wildly different tax rates across different energy sources".
Worst Decade for Incomes
Warning of the consequences of a low-growth economy, she said: "This decade looks set to be the worst decade for growth in household incomes on record… It's depressing. No amount of temporary cost of living packages will fix that. We need a stronger economy."
Urging the Government to tackle the nation's debt, she said: "Lower debt would allow us to stop devoting such an eye-watering share of our income to servicing the debt. It would give us more fiscal space to respond to the really big shocks of the future, whatever they may be."
She concluded: "[We] should all hope that John Healey has more than hope up his sleeve when the time comes to settle the next spending review."
