Reeves’ stealth taxes ‘hammering’ workers while pensioners and benefits claimants ‘better off’
Rachel Reeves’ decision to force millions of people to pay higher tax rates will “weaken” workers while retirees and people on benefits see their incomes rise, a new analysis has found.
In the budget the chancellor controversially froze income tax and national insurance thresholds until 2031; This means more staff will be forced to pay higher taxes as their salaries increase through inflation.
He said at the time that he was “asking everyone to contribute” to finance public services and investment amid a disrupted economy.
A new analysis by the Center for Policy Studies (CPS) think tank has found that a worker currently earning £50,000 will be £505 worse off in real terms by 2030-31, despite predictions that their wages will rise by more than £6,000.
But it said there was a “sunnier” picture for pensioners and those with standard universal credit.
Pensioners will be at least £306 better off in real terms thanks to the “triple lock”, which guarantees increases in line with inflation, earnings or 2.5 per cent at least.
In its analysis using inflation and wage growth forecasts from the Office for Budget Responsibility (OBR), the CPS said the figure for someone on out-of-work benefits would be £290 due to increases in the standard universal credit rate.
Many workers “will be worse off than today by 2030, unlike those who receive their income from the government through pensions or benefits”.
Daniel Herring, head of economic and fiscal policy at the CPS, said: “Labour’s tax policy is quietly crushing workers while protecting pensioners and welfare recipients.
“Freezing the personal allowance for income tax will affect everyone, but it is those pushed into higher tax bands who will suffer the most, to the point that a worker earning £50,000 today will actually be poorer in five years, despite pay rises.
“Meanwhile, both the state pension and universal credit will be more valuable in real terms.
“This is fiscal distress, which means raising taxes for millions of workers through the back door.”
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Ms Reeves’ freeze on personal tax thresholds is expected to deliver a boost of around £23bn for the Exchequer in 2030-31.
A Treasury spokesman said: “In the budget we increased the national living wage and national minimum wage and cut people’s energy bills by £150, 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.”
