Higher Tax Economy ‘To Hit Middle Income Families'

Higher taxes mean middle income families will be worse off by mid-decade, according to a new budget analysis by living standards think tank, the Resolution Foundation.

- Anna Isaac

Tax will reach its highest level as a share of the economy since 1950 by 2026-27, the study shows. This is equal to a £3,000 increase per household since Boris Johnson took office as prime minister.

It comes as weak pay growth will cause real wages to fall next year, accounting for inflation. This is even as the UK experiences its worst decade for pay growth since the 1930s.

The UK’s stagnant living standards “remain the dominant feature of this era” the think tank said. In the 16 years leading up to 2008, pay packets grew by 36 per cent on average, compared to 2.4 per cent in the 16 years up to 2024.

The Budget revealed “not the high wage economy envisaged by the prime minister last month, or even the lower tax economy that Rishi Sunak said was his goal yesterday”, said Torsten Bell, chief executive of the Resolution Foundation. “Instead the chancellor has set out plans for a new high tax, big state economy.

“Higher taxes aren’t a surprise given the UK is combining fiscal conservatism with an ageing society and a slow-growing economy. But it is the end of low tax conservatism, with the tax take rising by £3,000 per household by the middle of this decade,” he added.