Threshold Freeze Nets £220 Annual Levy on Basic Earners

The party pledged no income tax rises for working people. Chancellor Rachel Reeves honoured that by holding tax bands static. Wages rise, but frozen thresholds drag earners into higher brackets, hiking effective rates.

Resolution Foundation analysis cuts through the semantics. Low- and middle-income workers suffer more from this fiscal drag than outright rate hikes would impose. Chief executive Ruth Curtice calls it ironic: fidelity to the manifesto costs millions.

Institute for Fiscal Studies quantifies the hit. Basic-rate payers face £220 extra annually. Higher-rate taxpayers pay £600 more.

Reeves concedes the point. She told Sky News the freeze, extended to 2028, demands “a bit more” from workers. Yet she frames it as minimal contribution, despite £26 billion total tax burden growth.

Fiscal Drag’s Long Shadow

This mechanism predates Labour. Governments since 2010 have frozen thresholds repeatedly, lifting the tax burden to post-war highs. Labour’s extension compounds the squeeze on living standards.

OBR forecasts expose the bind. Growth projections downgraded, growth termed a “hurdle” unmet. Resolution Foundation predicts “bracing budgets” ahead, contradicting Reeves’ prior no-more-rises claim.

Borrowing swells initially. Policies add £5 billion average over three years before cuts kick in. Debt rules met by 2030, but only through headroom built on taxpayer pain.

Offsets Fall Short

Budget offers relief elsewhere. Two-child benefit cap scrapped aids families. Energy bills drop £130-150 yearly for three years via levy cuts.

These measures do little for workers. Gains fade post-2028, while threshold pain persists. Net effect: middle-class erosion funds welfare expansion.

Reeves credits stability from fiscal buffers. IFS agrees shocks now need larger triggers. But ordinary earners fund this insurance without consent.

Patterns of Evasion

Manifesto pledges bend under reality. Labour vowed tax protection, delivered stealth rises. Predecessors wielded identical tools, from austerity thresholds to NI hikes.

Tax burden hits 37.7% of GDP, highest in 80 years. Productivity stagnates, migration swells fiscal needs, yet core reforms evade politicians.

Citizens face material loss. A £26,000 earner loses £220 yearly—equivalent to 7% real wage cut amid 2% inflation. Families ration essentials as disposable income shrinks.

Institutions prioritise rules over outcomes. OBR scores compliance, thinktanks dissect mechanics, but no party confronts spending bloat or growth blocks. Voters absorb the bill.

This budget reveals entrenched pathology. Governments mask tax hikes through drag, defer pain via borrowing, then repeat. Britain’s economic decline accelerates as leaders chase fiscal illusions over revival.

Low earners fund a system that extracts without reform. Working people, promised relief, deliver the revenue instead.