Friday, November 28, 2025
Labour's tax grab to hit poorer households
The decision to abolish the two-child benefit cap was welcome, though it came much later than it should have done, but the increase in the tax burden on poorer households will almost certainly cancel out the rise in the minimum wage and the uplift for pensioners. For the first time, somebody whose only income is the state pension, will be paying tax on it. That has to be a regressive measure.
The Guardian has also concluded that Rachel Reeves will punish poorer households more than the better off through the freezing of income tax thresholds.
They say that more than 1.7 million workers will be dragged into either paying tax for the first time or pushed into a higher band by an additional three-year freeze on income tax and national insurance thresholds that will bring in an additional £12.4bn by 2030-31. Rachel Reeves may have conceded this measure will hit “working people” but she is wrong in my opinion in denying that it constitutes breaking the Labour manifesto.
And, as if to add insult to injury, buried in the budget is a plan to slash the Digital Services Tax, giving a multi-million pound tax cut to US tech giants and the likes of Elon Musk, cutting taxes for the world's richest man, while hiking them for millions of hard-working Britons.
The paper quotes Ruth Curtice, the chief executive of the Resolution Foundation who says that millions of low-to-middle earners would have been better off with a 1p tax rise than having their tax thresholds frozen, and it would have raised the same amount of money:
The Resolution Foundation said the chancellor delivered “a far more upbeat budget than many were expecting, with significant cost-of-living support and sensible, progressive measures that reduce some of the distortions in the tax system”.
But added: “It was far from pain-free, with major tax rises and cuts to public services coming down the line.”
It said claims by the chancellor that government departments would avoid a squeeze on spending were misplaced, saying tighter spending in the last years of the government would almost match the cuts imposed by the former Conservative chancellor George Osborne after the 2010 election.
“The departmental spending cuts announced in 2029-30, coupled with the government’s commitment to raise health and defence spending and protect per-pupil school funding, imply £6.4bn of cuts to other departments like the Home Office, justice and local government.
“Cuts of this nature would be equivalent to 88% of the average annual cuts made during the austerity years – 2009-10 to 2018-19,” it said.
And of course, this budget managed to avoid the elephant in the room, the biggest drag on growth in our economy, the single issue that leaves the chancellor of the exchequer barely managing to keep the nation's finances on an even keel, when she should be projecting future prosperity instead. That issue is of course, Brexit.
We were told that leaving the EU would save us £350m a week, but it has ended up costing us £250m a day in 2025. The extent to which Brexit is undermining our economic success is laid stark by the Best for Britain website, here.
They say that the total cost to the economy so far is between £180bn and £240bn, 70% of UK firms are reporting higher supply chain costs due to new tariffs and trade rules, while the UK government is losing £90bn in tax revenue each year.
The average decrease in GDP as a result of Brexit is between 6% and 8% or £3,700 per person, while the average food bill has increased by £250 per year, per household. It is estimated that 1.8 million jobs have been lost due to Brexit by 2023, while the health service, agriculture and the service sector are struggling to cope without labour from the EU.
Until Labour tackle this problem through a new trade deal with the EU that restores many of the benefits of being in the free trade area, then it won't just be the low paid who are barely managing, it will be the whole economy.
The paper quotes Ruth Curtice, the chief executive of the Resolution Foundation who says that millions of low-to-middle earners would have been better off with a 1p tax rise than having their tax thresholds frozen, and it would have raised the same amount of money:
The Resolution Foundation said the chancellor delivered “a far more upbeat budget than many were expecting, with significant cost-of-living support and sensible, progressive measures that reduce some of the distortions in the tax system”.
But added: “It was far from pain-free, with major tax rises and cuts to public services coming down the line.”
It said claims by the chancellor that government departments would avoid a squeeze on spending were misplaced, saying tighter spending in the last years of the government would almost match the cuts imposed by the former Conservative chancellor George Osborne after the 2010 election.
“The departmental spending cuts announced in 2029-30, coupled with the government’s commitment to raise health and defence spending and protect per-pupil school funding, imply £6.4bn of cuts to other departments like the Home Office, justice and local government.
“Cuts of this nature would be equivalent to 88% of the average annual cuts made during the austerity years – 2009-10 to 2018-19,” it said.
And of course, this budget managed to avoid the elephant in the room, the biggest drag on growth in our economy, the single issue that leaves the chancellor of the exchequer barely managing to keep the nation's finances on an even keel, when she should be projecting future prosperity instead. That issue is of course, Brexit.
We were told that leaving the EU would save us £350m a week, but it has ended up costing us £250m a day in 2025. The extent to which Brexit is undermining our economic success is laid stark by the Best for Britain website, here.
They say that the total cost to the economy so far is between £180bn and £240bn, 70% of UK firms are reporting higher supply chain costs due to new tariffs and trade rules, while the UK government is losing £90bn in tax revenue each year.
The average decrease in GDP as a result of Brexit is between 6% and 8% or £3,700 per person, while the average food bill has increased by £250 per year, per household. It is estimated that 1.8 million jobs have been lost due to Brexit by 2023, while the health service, agriculture and the service sector are struggling to cope without labour from the EU.
Until Labour tackle this problem through a new trade deal with the EU that restores many of the benefits of being in the free trade area, then it won't just be the low paid who are barely managing, it will be the whole economy.
