Lack of low-income support pushes 1.3 million into poverty, think tank says

Resolution Foundation warned Rishi Sunak’s measures represented a ‘big but poorly targeted policy package’.

24 March 2022

The lack of support for low-income families in the Chancellor’s spring statement leaves more than one million Britons on the verge of “absolute poverty”, a think tank has said.

Resolution Foundation, a living standards think tank, warned Rishi Sunak’s measures represented a “big but poorly targeted policy package” which does not do enough to aid the families who have been hit the hardest by the cost-of-living crisis.

In his Commons statement, Mr Sunak announced a 5p cut in fuel duty and an increase in the threshold at which people pay national insurance contributions, benefiting around 30 million workers with a tax cut worth more than £330.

He promised further support in 2024 with a pledge to cut the basic rate of income tax from 20p in the pound to 19p – “a £5 billion tax cut for over 30 million people”.

However, analysis from the Resolution Foundation said Mr Sunak’s measures do not meet the scale of the cost-of-living squeeze, with 1.3 million Britons set to fall below the poverty line next year, including 500,000 children – the first time Britain has seen such a rise outside of a recession.

It also determined that only one-in-eight workers will actually see their tax bills fall by the end of the parliament.

Resolution Foundation’s analysis states: “Considering all income tax changes to thresholds and rates announced by Rishi Sunak, only those earning between £49,100 and £50,300 will actually pay less income tax in 2024-25, and only those earning between £11,000 and £13,500 will pay less tax and national insurance.

“Of the 31 million people in work, around 27 million (seven-in-eight workers) will pay more in income tax and (national insurance) in 2024-25.”

The think tank added that typical working-age household incomes are set to fall by 4% in real terms next year, while incomes in the poorest quarter of households are expected to fall by 6%.

Resolution Foundation chief executive Torsten Bell said: “The decision not to target support at those hardest hit by rising prices will leave low- and middle-income households painfully exposed, with 1.3 million people, including half a million children, set to fall below the poverty line this coming year.

“And despite the eye-catching 1p cut to income tax, the reality is that the Chancellor’s tax changes mean that seven-in-eight workers will see their tax bills rise. Those tax rises mean the Chancellor is able to point to a swift fiscal consolidation and significant headroom against his fiscal rules.

“The big picture is that Rishi Sunak has prioritised rebuilding his tax-cutting credentials over supporting the low-to-middle-income households who will be hardest hit from the surging cost of living, while also leaving himself fiscal flexibility in the years ahead.

“Whether that will be sustainable in the face of huge income falls to come remains to be seen.”

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