Richard Hughes, chairman of the Office for Budget Responsibility (OBR), told the MPs “overall personal taxes are going up” because of tax rises announced in previous Budgets.
He added: “The 1p cut to the basic rate of income tax reduces by about one-quarter the overall rise in personal taxes.
“Because of the health and social care levy, but also the freezing of the personal allowance for income tax and national insurance, especially in the context of higher inflation, that is bringing millions of people more into the tax system, and also more people into being higher-rate taxpayers.”
Mr Sunak suggested that the income tax cut in two years’ time is intended as “a sense of direction” to keep “discipline” on spending within the Government amid rumours of disagreements between the Treasury and Boris Johnson, the Prime Minister.
On top of rising taxes, households are also being pummelled by inflation.
Speaking at an event hosted by the Bruegel think tank, Mr Bailey warned that the pain about to be suffered by households will be worse than anything felt for a generation. The OBR said last week that real household incomes will suffer their worst fall on record in 2022.
Mr Bailey said: “This really is an historic shock to real incomes.
“The shock from energy prices this year will be larger than every single year in the 1970s.”
David Miles at the OBR said: “Pretty much everyone is going to take a significant hit to their real standard of living this year.”
Those on lower incomes will be affected most as energy bills take a higher share of their incomes, he said, though raising the national insurance threshold will help those on modest earnings.
Mr Sunak said he had worked to offset some of this hit with loans to households to reduce their immediate energy bills, as well as a council tax rebate for a majority of homes.
Labour MP Siobhain McDonagh asked “do you think people are stupid? Do you think people are not going to see through this?”.
Energy bills are set to rise this year to the biggest share of household income since the early 1980s.
Regulator Ofgem is due to announce the next change to the energy price cap in August. The Treasury is considering new measures to help families, Sky News reported, to be revealed at the same time.
Mel Stride, Conservative MP and chairman of the committee, said: “We cannot really get away from the fact that if you are out of work and on benefits, there was very little really in the spring statement.”
Sir John Redwood, Conservative MP, said the Chancellor needs to cut taxes to boost the flagging economic recovery.
“We need tax cuts to promote growth and to ease the squeeze on real incomes,” he said.
“The Treasury has collected billions more tax this year than they planned thanks to faster growth. Promoting growth is the way to get the deficit down.”