The task of repairing Britain's public finances remains far from finished despite Chancellor Rachel Reeves's budget measures, according to fresh analysis from leading economic think tank the Resolution Foundation.
Budget Analysis Reveals Tough Road Ahead
In its overnight assessment of Wednesday's fiscal statement, the Foundation warned that major tax increases and reductions in public spending are looming for the UK economy. The think tank's examination reveals that both pre-election austerity measures and significant tax rises are currently pencilled in by the Treasury.
While the back-loaded tax increases are substantial - projected to raise approximately £26 billion - additional government expenditure implemented sooner means UK national debt is now on track to exceed previous forecasts made in March.
Fiscal Drag Hits Lower Earners Hardest
One of the most striking findings from the Resolution Foundation concerns the impact of the Chancellor's approach to taxation. The analysis indicates that less wealthy families would actually be better off if the government had explicitly broken its manifesto commitments and increased income tax rates directly.
Instead, by maintaining the freeze on tax thresholds and relying on 'fiscal drag' to collect more revenue as wages gradually increase, millions of low-to-middle income earners will face a heavier burden than if their tax rates had simply risen.
Three Hurdles Facing the Chancellor
Resolution Foundation Chief Executive Ruth Curtice identified three critical challenges the Chancellor needed to address in her budget. "The Chancellor needed to clear three crucial hurdles in her Budget - to ease cost of living pressures, tax smartly and repair the public finances," Curtice stated.
She acknowledged that the government had been "front-footed - and front-loaded - on cost of living support," noting that over half a million larger families will receive significant income boosts next spring, while typical energy bills will be reduced by around £130 annually for the next three years, though this support eventually diminishes.
Curtice praised "sensible tax reforms" that would help level up the treatment of different income types but highlighted the irony that "sticking to her manifesto tax pledge has cost millions of low-to-middle earners."
Although the Chancellor has more than doubled the headroom against her fiscal rules, Curtice cautioned that "appearances can be deceiving." She emphasised that debt levels have increased and the majority of fiscal repair work has been postponed for at least three years.
The final unresolved challenge remains boosting economic growth, which has been downgraded by the Office for Budget Responsibility along with the outlook for living standards. Until this fundamental issue is properly addressed, Curtice warned that Britons should "expect plenty more bracing Budgets" in the coming years.
The Foundation is scheduled to present its comprehensive analysis at a morning event examining what the budget means for the public, financial markets and the ongoing cost of living crisis.
