The Resolution Foundation has said typical household disposable incomes were on course to be lower by the end of the forecast period in 2027-28 than they were before the pandemic, when inflation was taken into account.
Chancellor, Jeremy Hunt, was unable to change the course of declining living standards, the foundation said.
“Britain’s economy remains stuck in a deep funk – with people supported into work but getting poorer, and paying more tax but seeing public services cut,” the report said.
Workers also face paying more to the Treasury because personal tax thresholds have been frozen instead of rising with inflation, meaning wage growth pushes more people into higher rate bands – a phenomenon known as “fiscal drag”.
Intense cost pressure on public services from stagnant budget allocations and rising inflation were “largely ignored” in the budget, the thinktank said, adding that Whitehall departments outside the protected areas of health, schools and defence faced 10% cuts in real terms to day-to-day spending per head by 2027-28. This loss of spending power across most government departments will rise to 14% “if the newly announced aspiration for defence spending to rise to 2.5% of GDP is met over the next parliament”.