Labour‘s record-breaking tax increases will leave the richest half of households £1,000 a year worse off, a think-tank warned yesterday.
Britain’s tax bill is on course to rise by £68billion – when combining the impact of Rachel Reeves‘ first two Budgets – according to the Resolution Foundation.
And it will add up to the biggest tax-raising Parliament in history, according to the Institute for Fiscal Studies (IFS).
Experts said the outlook for the economy under Labour – which insists that growth is its number one mission – was ‘truly dismal’.
The Left-leaning Resolution Foundation said the combined impact of the Chancellor’s two Budgets so far overtakes that of two Tories, Norman Lamont and Kenneth Clarke, in the 1990s.
It is ‘the biggest double whammy of taxes for a newly-elected government on record,’ the think-tank’s research director James Smith said.
And chief executive Ruth Curtice said the sluggish economic outlook meant more pain was likely to come, with ‘plenty more bracing Budgets’ on the way.
A breakdown of the figures illustrates Labour’s determination to raid aspirational middle-earners in order to splurge more on benefits. The Chancellor’s freeze in income tax thresholds combined with the mansion tax on homes worth £2million or more are among the policies that will leave better-off families worse off to the tune of £1,000 on average. Some 78 per cent of households in the top half are expected to be worse off overall.
Britain’s tax bill is on course to rise by £68billion – when combining the impact of Rachel Reeves ‘ first two Budgets – according to the Resolution Foundation
At the same time, the poorer half of families stand to gain £90 overall thanks to welfare spending, including the removal of the two-child benefit cap.
They also benefit from more general giveaways on energy prices and fuel duty – outweighing the impact, for this group, of tax hikes.
The IFS said the Budget had done nothing to boost the ‘lacklustre’ economy or ‘stagnating’ living standards.
Disposable incomes will only grow by around 0.5 per cent per year on average over the course of this Parliament, which it branded ‘truly dismal’. IFS director Helen Miller said: ‘Growth not only makes us richer, it makes almost every problem easier to solve.
‘At the last Budget the Chancellor said: ‘Every Budget I deliver will be focused on our mission to grow the economy.’ That wasn’t on show yesterday.’
She accused Ms Reeves of shying away from ‘meaningful’ tax reform, and instead delivering a Budget that felt like a government trying to ‘scrape through’.
Ms Miller also claimed that the months of briefing about the poor state of the public finances had not materialised. Rather than facing a Budget black hole, Ms Reeves had been on course for a small surplus, with just a £6billion downgrade in the outlook.
Therefore, the Chancellor had made a ‘decision’ to hike taxes to increase spending and boost her headroom, even though there was ‘no fiscal repair job needed’.
The decision to extend the freeze in personal tax thresholds for three years will mean more than a quarter of all taxpayers fall into the higher or additional rate bands, the IFS said.
And its analysis suggested basic-rate taxpayers will pay £220 more tax per year, while higher-rate taxpayers will have to stump up £600 more per year. Middle and higher income households will bear the brunt of all the tax changes combined.
Experts also raised doubts about sharp spending cuts – around the time of the next election – that would be needed for the Chancellor to meet her Budget targets.
Yael Selfim, chief economist at KPMG UK, said firms were gloomy at the prospect that this would mean more taxes for them.
‘There is no message. It’s very difficult for businesses to think there is growth.
‘The Chancellor still says a lot of the right things, it’s just that there’s no delivery. The time has passed when you actually hope this will come.’
