Rachel Reeves’s ‘fiscal drag’ stealth tax will leave striving British workers £505 worse off by 2030 – but benefit claimants win big
Millions of workers will find themselves worse off by 2030 as Labour’s tax policy ‘silently hits’ workers but leaves benefit claimants and pensioners richer, a think tank has warned.
The effects of fiscal drift, where individuals are pushed into higher tax brackets due to frozen income and national insurance tax thresholds, mean that a worker earning £50,000 today will be £505 worse off in real terms by 2030, even though wages have risen to £56,000 in that period.
While workers find themselves out of pocket, Labour’s secret tax raid will leave pensioners protected by the triple lock at least £306 better off, or £537 better off if they are exempt from income tax through the quadruple lock.
Similarly, the number of benefit claimants will rise by £290 in real terms by 2030, thanks to Labour’s increases to the standard tax rate.
Meanwhile, those earning around £50,000 who will be hardest hit will face a combined tax rate of 28 per cent to 42 per cent on income earned above the top rate threshold of £50,270.
Chancellor Rachel Reeves extended the freeze on income and national insurance tax thresholds until 2031 in the Autumn Budget, despite Labor promising not to increase taxes on workers in its manifesto
A worker earning £50,000 today will be £505 worse off in real terms by 2030, even though wages have risen to £56,000 in that period
Daniel Herring, Head of Economic and Fiscal Policy at the Center for Policy Studies, the think tank behind the new research, said: ‘Labour’s tax policy is quietly hitting workers while protecting pensioners and welfare recipients.
‘Freezing the personal allowance for income tax will affect everyone, but those who will really suffer are those pushed into higher tax bands; so that a worker who has £50,000 today will actually become poorer in five years, despite a pay rise.
‘Meanwhile, the state pension and Universal Credit will both become more valuable in real terms.
‘This is fiscal distress that means raising taxes for millions of workers through the back door.’
Chancellor Rachel Reeves has been widely criticized for secretly increasing taxes after extending the freeze on income and national insurance tax thresholds until 2031 in the Autumn Budget, despite pledging in Labor’s manifesto not to increase taxes on workers.
The changes mean that workers will now see their living standards fall, while living standards rise for those dependent on the state.
It comes after the Daily Mail revealed that Ms Reeves had announced more tax increases than any other Chancellor in at least six decades.
A historical database of budget measurements shows the Chancellor has been ‘scored’ to add £75.1bn a year to the burden on hard-working Brits.
A HM Treasury spokesman said: ‘In the Budget we increased the National Living Wage and National Minimum Wage and cut £150 off people’s energy bills, extended the freeze on prescription charges and fuel duty, and froze rail charges for the first time in 30 years.
‘The fair and necessary decisions we have made in the budget mean we can deliver on the country’s priorities: reducing waiting lists, reducing debt and borrowing and reducing the cost of living.’
