Kwarteng to announce biggest tax cuts since Thatcher in push for growth

However, despite the deficit binge, households will still feel worse off this year due to rampaging inflation, analysts warned.

On top of this, the economy has slowed to a crawl and may already be in recession, undermining tax revenues and so further tipping the public finances into the red.

“The economy is set to grow a lot more slowly than was expected [at the time of the March spring statement] so even without the tax cuts, it looks like the long-term deficit will be perhaps £40bn higher than expected back then, after all of the energy support package has come to an end,” Mr Johnson said.

“Add another £30bn of tax cuts and we are expecting to end up with a deficit in three years’ time at around the £100bn mark.”

It puts the Government on track to borrow around £100bn or more each year for the foreseeable future, the IFS warned, starting with £231bn this year – up from the £99bn the Office for Budget Responsibility predicted back in March – and £162bn next year, more than three-times March’s forecast of £50bn.

For the following three years, the annual deficit is set to come in at around £100bn, compared to around £35bn per year on the OBR’s prior predictions.

“If that is where we end up, not only will that break the fiscal rules legislated just earlier this year, it will put debt on an unsustainable path,” said Mr Johnson.

However, despite the tax cuts and very heavy spending to hold down energy bills, the average person will still feel worse off this year than last year thanks to galloping inflation eroding living standards.

The median worker on £29,000 will be just over £500 worse off, equating to a 2.8pc fall in their real earnings, the IFS estimates.

Someone on £44,000 will be down more than £1,000, or 3.9pc.

Only a full-time worker on the minimum wage, earning £16,200, will find themselves keeping up with prices, eking out a 0.1pc rise in take-home pay this year.

Boris Johnson’s government effectively overall implemented “a large tax rise”, said Xiaowei Xu at the IFS.

Some of this will be softened by Mr Kwarteng’s expected tax cuts, but overall Britons face net tax rises over the past 12 months, amounting to a roughly £500 hit for the average household, rising to close to £2,000 for those in the top 10pc by income.

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