‘Who Wins Under Labour?’ shows how fiscal drag – where frozen tax thresholds pull more workers into higher tax bands as wages rise – will quietly erode living standards for millions of middle earners over the coming years.
Some of the worst hit will be those earning around £50,000, who face jumping from a 28% combined tax rate to 42% on any income over the higher rate threshold of £50,270.
The analysis shows that under OBR forecasts for wage growth and inflation, workers earning around £50,000 today will be worse off by 2030, even as pensioners and benefit recipients enjoy real-terms gains.
Pensioners, whose incomes are protected by the triple lock, will be at least £306 better off by 2030/1 in real terms – or £537 better off if the state pension is exempted from income tax. Increases to Universal Credit will increase its value by £290.
Daniel Herring is Head of Economic & Fiscal Policy at the Centre for Policy Studies. He was previously at the Legatum Institute, where he led work on the Institute’s Prosperity Index. He began his career at the New Zealand Treasury. He holds degrees in Law and Arts (majoring in Politics and Economics) from the University... View Article
