Middle England is set for a financial “shock” following Jeremy Hunt’s £55bn package of tax rises and spending cuts, leading economists have warned.
In its analysis of the autumn statement, the Institute for Fiscal Studies (IFS) said “virtually all of us” can expect to be “worse off”.
Paul Johnson, the think-tank’s director said on Friday, that “higher taxes look to be here to stay”.
“I would be most surprised if the tax burden gets back down to its long term pre Covid average at any time in the coming decades,” he said.
“This will hit everyone. But perhaps it will be those on middling sorts of incomes who feel the biggest hit.
“They won’t benefit from the targeted support to those on means-tested benefits. Their wages are falling and their taxes are rising. Middle England is set for a shock.”
Johnson added: “On some measures it looks like we will be an astonishing 30% worse off than we might have expected had pre-financial crisis trends continued through to the mid-2020s.”
The chancellor said the measures in his autumn statement were necessary to fill a black hole in the government’s finances.
Hunt’s plan includes £25bn of tax rises with the rest of the savings made up from spending cuts.
He decided to freeze the income tax personal allowance at £12,570 until April 2028. It means all earnings above this will be subject to more taxation.
The threshold at which the 45p top rate of tax kicks in will also fall from £150,000 to £125,140 from April 2023.
Hunt has argued much of the blame for rampaging inflation and economic turmoil lies at the door of global factors including Russia’s invasion of Ukraine.
But the prime minister and chancellor are also having to try and fix the damage done by Liz Truss’ mini-Budget in September.
Official forecasts show the UK is already in recession and living standards are set to fall by 7% over two years.
Labour’s shadow chancellor Rachel Reeves said Hunt’s “stealth taxes” were taking billions of pounds from ordinary working people.
She added “the mess we are in is the result of 12 weeks of Conservative chaos but also 12 years of Conservative economic failure”.