Millions of workers will find themselves worse off by 2030 as Labour’s tax policy ‘quietly hammers’ workers yet leaves benefits claimants and pensioners richer, a think tank has warned.
The effects of fiscal drag – where individuals are pushed into higher tax brackets by 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, despite their salary rising to £56,000 in that time.
As workers find themselves out of pocket, Labour’s stealth tax raid will leave pensioners protected by the triple lock at least £306 better off, or £537 better off if they are exempted from income tax via the quadruple lock.
Similarly, benefits claimants will be up by £290 in real terms by 2030, thanks to Labour’s increases to the standard rate of tax.
Meanwhile, those earning around £50,000, who will be hardest hit, face jumping from a 28 per cent to a 42 per cent combined tax rate on income earned over the higher rate threshold of £50,270.
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Daniel Herring, Head of Economic and Fiscal Policy at the Centre of Policy Studies, the think tank behind the new research, said: ‘Labour’s tax policy is quietly hammering workers while protecting pensioners and benefit recipients.
‘Freezing the personal allowance for income tax will hit everyone, but it’s those who are dragged into higher tax bands who will really suffer – to the point where a worker on £50,000 today is set to actually be poorer in five years’ time, despite getting pay rises.
‘Meanwhile, the state pension and Universal Credit will both be worth more in real terms.
‘This is fiscal drag in action, raising taxes for millions of workers through the back door.’
Chancellor Rachel Reeves has been widely criticised for raising taxes by stealth after extending a freeze on income and national insurance tax thresholds until 2031 in her Autumn Budget – despite Labour pledging not to raise taxes on working people in its manifesto.
The changes mean workers will now see living standards fall as they rise for those dependent on the state.
This comes after the Daily Mail revealed Ms Reeves has announced more tax rises than any other Chancellor in at least six decades.
An historic database of Budget measures shows the Chancellor has been ‘scored’ as adding £75.1billion a year to the burden on hard-working Brits.
An HM Treasury spokesperson said: ‘In the Budget we increased the National Living Wage and National Minimum Wage and took £150 off people’s energy bills, extended the freeze on prescription fees, fuel duty and froze rail fares for the first time in 30 years.
‘The fair and necessary decisions we made at the Budget mean we can deliver on the country’s priorities – cut waiting lists, cut debt and borrowing and cut the cost of living.’
