Think tank warns Budget tax cuts will not compensate for price rises

08 Mar 2024

The Institute for Fiscal Studies (IFS) has warned that the tax cuts announced in the 2024 Spring Budget will not compensate for tax rises and price increases.

It said that in 2024/25, the net effect of all national insurance contributions (NICs) and income tax changes since 2021 for an average earner will be a tax cut of about £340. Around half of employees, those earning between £26,000 and £60,000 per year, will be better off, but other employees earning enough to pay NICs or income tax will be worse off, because the cuts to NIC rates are more than offset by other tax rises.

'The big picture on tax remains much the same,' said Paul Johnson, Director of the IFS. 'This remains a parliament of record tax rises.

'Overall, for every £1 given back to workers (including the self-employed) by the NICs cuts, £1.30 will have been taken away due to threshold changes between 2021 and 2024, with this rising to £1.90 in 2027.'

Commenting on the Budget measures, Mr Johnson continued: 'While the Office for Budget Responsibility (OBR) got a little more positive in its projections, the picture on living standards also remains dismal. On average, households will be worse off at the time of the next election than they were at the last, following nugatory real earnings growth.

'The Chancellor is still on track to stabilise debt as a fraction of national income in five years' time, just about, but only on the basis of a pie-in-the-sky promise to increase fuel duties and a set of post-election spending plans that still imply substantial cuts to funding of many public services which are clearly struggling with their current level of funding.'