Middle earners are likely to be “worse off” next year than this as high rates of inflation and tax rises more than negate small average wage increases, the Institute for Fiscal Studies (IFS) has warned.
In its analysis of Rishi Sunak’s Budget, released on Thursday morning, the respected independent economics think-tank said high inflation, rising taxes, and poor growth, undermined more by Brexit than by the pandemic, will see real living standards barely rising and, for many, falling over the next year.
Paul Johnson, the director of the IFS, said he expected “millions will be worse off in the short term”.
“Over the next several years a combination of tax increases and high inflation will mean very slow growth in living standards,” he said.
“The worry for the government is that, for all the chancellor’s upbeat delivery, the voters may not get much feelgood factor.”
He added: “The gap between what we might have expected on the basis of pre financial crisis trends and what is actually happening is staggering.
“Average gross earnings could have been some 40% higher had pre crisis trends continued.”
This article originally appeared on HuffPost UK and has been updated.