LOWEST paid workers will be hit the hardest by Labour Chancellor Rachel Reeves budget’s ‘stealth tax’ unveiled on Wednesday.
Reeves desperate to avoid accusations of breaching Labour’s election pledge not to increase taxation on ‘working people’, has resisted all the calls from left wing Labour MPs to make the rich pay through some form of wealth tax.
Instead, she decided to extend the freeze, first introduced by the Tories, which marks the threshold at which people pay different rates of income tax.
According to the National Institute of Economic and Social Research (NIESR), those in the bottom 30% of earners will be hit hardest by this freeze, which means that as people earnings increase they are brought into higher rates of income tax.
This includes all those earning the National Minimum Wage which Reeves announced would increase to £12.71 an hour for those aged over 21.
The NIESR analysis shows that the very lowest paid would see their disposable income cut by over 2.5% while those earning slightly more would experience almost a 5% cut.
Adrian Pabst, deputy director of NIESR, said that the household disposable income for around 30% of low paid workers ‘will fall by close to 5% compared with the alternative of uprating the thresholds in line with inflation in 2028, as the Chancellor had promised in her October 2024 Budget’.
He added: ‘This tax rise will knock, not boost, living standards.’ This freeze of income tax thresholds will result in 10 million workers paying the higher rate of income tax with the number of workers paying the higher rate increasing from 1 in 10 in 2019 to 1 in 4 by 2030.
The Office for Budget Responsibility (OBR) delivered its own damning verdict on Reeves’ budget with David Miles, one of its officials, describing the growth in household incomes as ‘disappointingly low’.
The Joseph Rowntree Foundation presented an even bleaker picture once the effect of broader increases in housing costs were taken into account.
On this measure, the average household will be £850 poorer in 2029-30 than in 2024-25.
In total, Reeves’ budget aimed at raising £26 billion from the working class while leaving the profits of the capitalist class intact.
Sharon Graham, general secretary of the Unite trade union, responded to the budget saying: ‘Millions of workers are being forced to live hand to mouth, surviving rather than living. Communities are being ground down by surging energy bills and baked in high food prices, while at the same time profits soar.’
She continued: ‘Energy companies have made over £30 billion in profits, costing households £500, while supermarkets led by Tesco – which made £3.1 billion – are coining it in.’
Graham concluded: ‘The Chancellor has picked a side. Health workers, engineers, and tanker drivers will pay through stealth taxes, while city bankers and billionaires go largely unscathed.’
This verdict of the biggest industrial based union in the country contrasted dramatically from the praise heaped on Reeves budget by the general secretary of the TUC, Paul Nowak.
Commenting on the budget Nowak said: ‘The Chancellor has delivered urgent relief to millions of hard-pressed households up and down the country and helped to rebuild our public services.’
Nowak completely ignored all the analysis carried out to proclaim that the budget ‘will disproportionately benefit those low and middle income households at the sharp end’.
Nowak and the TUC are performing the role of propping up a crumbling Labour government that is desperately attempting to rescue bankrupt British capitalism by passing the costs of its bankruptcy onto the working class.
The immediate issue for the working class is to demand an emergency TUC conference to remove those leaders who are desperately attempting to keep the working class from bringing down the Starmer government.
These leaders must be replaced with a new leadership prepared to call an immediate general strike to bring down the Labour government and bring in a Workers Government and socialism.
Join the WRP and Young Socialists to build up the leadership required to put bankrupt British capitalism out of its misery with the victory of the socialist revolution.
