IMF hails Reeves’ ‘sustainable’ tax rises; Resolution Foundation says budget marks ‘decisive shift from planned cuts’ – business live

Foundation says there will be better funded public services in schools, NHS and justice but households face further squeeze

And a few more – Resolution Foundation analysis:

Tax and benefit changes fall on everyone’s shoulders. The combined impact of benefit cuts, employer national insurance rises and consumption tax changes are felt evenly across the income distribution. The poorest half of households face a 0.8% reduction in their annual income on average, while the richest half face a 0.6% decrease. However, increases to capital gains and inheritance taxes (not included in this modelling) are more progressive, so wealthy households will face the largest cash impact overall.

A prolonged pay downturn. The combination of higher inflation and weaker growth stemming from increased taxes on employment, coming on top of an already challenging outlook, mean that real pay is set to stagnate again in the middle of this parliament. As a result, by 2028 real wages are expected to have grown by just £13 a week over the past two decades.

A (public) investment nation…The welcome boost to public investment, preventing the planned cuts set out by the previous government, means that Public Sector Net Investment is set to average 2.6% of GDP over the forecast period. This would be the highest five-year average in the UK since 1980-81, and bring the country close to the OECD average.

…or a stagnation nation? Real household disposable income per person is projected to grow by 0.5% a year on average across the parliament. While stronger than growth during the last parliament (0.3%), it would still be the worst term for living standards under a Labour government, lower even than the 0.8% annual growth recorded in the 2005-2010 Parliament.

Britain’s National Health State. Health alone accounts for 40% of the overall £35bn real increase to day-to-day public service spending between 2023-24 and 2025-26. As a result, the 2025-26 health budget will account for 42% of all departmental spending, up from 31% in 2007-08.

A tight Spending Review. The decision to frontload public service spending increases into this year and next have created a tough climate for the spending review next spring. Setting a spending envelope that increases by just 1.3% a year in day-to-day spending on public services between 2025-26 and 2029-30 implies £10.8bn of real per person cuts to unprotected departments, sending their funding back to 2015-16 levels.

No margin for error. Having chosen a new debt rule that gives her more headroom, the chancellor has already used it up, with just £9.9bn to spare against the current balance rule, and £16bn against the public sector net financial liabilities rule. Even a modest economic downturn could force the chancellor to come back for more tax rises at a future fiscal event.