Rishi Sunak has bowed to intense pressure by partly reversing universal credit cuts as he announced measures in the budget to deal with a squeeze on households this winter, with lower alcohol and fuel duties. Millions of struggling low-income households will not benefit from the £2bn “tax cut for the low paid” announced by Sunak in the budget as a way of easing the pain of soaring living costs, according to campaigners. Taxes on draught beer and prosecco will be slashed after the chancellor announced sweeping changes to alcohol duty that reward lower-strength drinks. The chancellor was handed an extra £51bn for his budget after the government’s independent forecasting unit upgraded its forecast of the economy’s recovery to a more optimistic outlook for growth this year. The Office for Budget Responsibility said Britain’s tax burden was heading to its highest level since the early 1950s – although Nick Macpherson, a former Treasury permanent secretary, says this may not happen in practice. Sunak’s two budgets in 2021 have now raised taxes by more than in any single year since Norman Lamont and Ken Clarke in 1993, the year of Black Wednesday. But yet ... the chancellor has told backbench MPs tonight that he would like to prioritise tax cuts, with City analysts suggesting he is assembling a pre-election war chest. Large swathes of the population face a squeeze on living standards over the coming year, the Institute for Fiscal Studies said. It warns middle earners will see their take-home pay fall over the next year, after inflation, due to rising prices and taxes. The OBR said real disposable incomes wouldn’t reach pre-pandemic levels until the second half of 2023. Sunak’s plans could be threatened if the economy slows and inflation picks up. The chancellor was bullish about the economy’s prospects but the OBR said growth was slowing and inflation would hit 4.4% next year. Even a mild dose of stagflation would blow the chancellor off his tax-cutting course. Cuts to the UK’s foreign aid budget are to remain for at least another three years, with aid spending below the statutory target of 0.7% until at least 2024-25, the Treasury has announced. Retailers have warned the chancellor’s decision to dodge a full review of business rates will result in an “unnecessary loss” of jobs and shops – saying the budget’s temporary 50% cut for small businesses is not enough to help the high street. Keir Starmer has tested positive for Covid, the Labour party has confirmed, meaning he was unable to take part in prime minister’s questions and will not be able to respond to the budget. Here’s our list of key points from the budget. And here is a Guardian panel, with verdicts on the budget from Miatta Fahnbulleh, Polly Toynbee, Katy Balls, Carys Roberts and Frances O’Grady.
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