Rachel Reeves has been warned her Budget will lead to “truly dismal” living standards, as economists have issued a damning verdict.
The Budget, announced on Wednesday, will leave workers thousands of pounds worse off by stealth taxes, experts have said.
Living standards are expected to stagnate, while average disposable income is to rise by just 0.5 per cent over each of the next five years, representing the second-lowest growth in living standards on record.
Average disposable income is the measure of people’s earnings after tax.
The Chancellor announced £30billion of tax rises, including a three-year freeze in income tax thresholds that will raise £12.7billion.
The move is described as a stealth tax because people fall into higher tax brackets, which remain frozen, with pay increases, even in line with inflation.
It means that 10.6million people will be paying a higher rate of tax by the end of the decade.
And people continue to accuse Ms Reeves of breaking fundamental manifesto pledges.
The Institute for Fiscal Studies (IFS) have said that rises in national insurance, including a further tax on pension contributions, demonstrate a clear breach of Labour’s manifesto pledge not to increase taxes on working people.
Rachel Reeves has been warned her Budget will lead to “truly dismal” living standards, as economists have issued a damning verdict
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Helen Miller, director of the IFS, said: “Before this budget, the UK was faced with lacklustre economic growth, stagnating living standards, and a dizzying array of fiscal pressures. The same is still true after this budget.”
She also added that stagnating living standards were “truly dismal” when compared with the 1980s and 2000s.
Thinktank The Resolution Foundation said that the nine-year freeze in income tax thresholds will leave a typical worker earning £35,000 more than £1,400 worse off by 2030.
The party had pledged not to increase income tax, national insurance or VAT.
And while the Chancellor did concede that her policies would have an impact on “working people”, she remains firm that no manifesto promise has been breached.
Sir Keir Starmer and Rachel Reeves are facing mounting pressure in what appears to be two broken manifesto pledges in as many days
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But the tax hike is not the only promise Labour are in danger of breaking already.
On Friday, Sir Keir Starmer faced more pressure after abandoning plans to give workers day-one protection against unfair dismissal.
The decision has split the party, with Labour MP for Middlesbrough and Thornaby East, Andy McDonald, branding the move a “complete betrayal”, vowing to push for its reversal.
While ex-employment minister, Justin Madden, said: “It might be a compromise. It might even be necessary to get the Bill passed. But it most definitely is a manifesto breach.”
Education Minister Bridget Phillipson refused to admit this was the case, however.
Later in the day, the Office for Budget Responsibility suggested the Chancellor falsely claimed she had inherited a £20billion “black hole”.
Instead, by October, this is said to have turned into a net positive of £4.2billion, meaning it did not even exist by the time Budget announcement rolled around.
All the while, taxes have been hiked to fund the £16billion increase in welfare spending by 2030, plus the £3billion cost of the abolition of the two-child benefit cap – under the falsehood of a huge financial deficit.
Polling by YouGov also suggested that almost six out of 10 voters thought that the Chancellor had broken a manifesto pledge, including almost half of those who voted Labour at the last election.
Just nine per cent thought that they would be better off as a result of the changes announced on Wednesday, while only one in 10 thought Ms Reeves was doing a good job as Chancellor.