By David Milliken
LONDON (Reuters) – Higher inflation and rising taxation to fund growing demand for healthcare and other public services will cause living standards in Britain to barely rise over the coming year, the Institute for Fiscal Studies think tank said on Thursday.
The IFS – whose views on economic policy are closely watched in Britain – said Wednesday’s budget statement from finance minister Rishi Sunak represented a big shift in favour of higher taxation and spending, compared his immediate predecessors.
“What we have had is a chancellor responding to the ever-increasing demands of the healthcare system on the one hand, and the increasingly dire plight of the likes of the justice, social care and prison systems, starved of funding for a decade, on the other,” IFS director Paul Johnson said
Britain’s budget forecasting agency, the Office for Budget Responsibility, said Sunak’s budget and tax rises announced earlier in the year would see the tax burden rise to its highest since the 1950s, and public spending increase to its highest since the 1970s.
The OBR also forecast inflation will average 4% next year, which would be its highest since 2011.
“Voters may not get much feel-good factor. High inflation, rising taxes, and poor growth, still undermined more by Brexit than by the pandemic, will see real living standards barely rising and, for many, falling over the next year,” the IFS’s Johnson said.
(Reporting by David Milliken, editing by Andy Bruce)
