Chancellor Rachel Reeves is facing accusations of implementing a "stealth tax" that could drag 1.3 million more people into paying the higher 40p income tax rate, according to new research revealed ahead of Wednesday's Budget.
The Stealth Tax Impact
Analysis from the House of Commons library, commissioned by the Liberal Democrats, shows that freezing income tax thresholds until 2029/30 will push an additional 1.3 million earners into the higher tax bracket. This would bring the total number of people paying the 40p rate to 9 million since thresholds were initially frozen at the £50,270 level.
The research indicates that the overall impact of threshold freezes will reach £55.9 billion annually by 2029-30, with £7 billion of this attributed to Labour's policies and the remainder resulting from previous Conservative government decisions.
Political Backlash and Hypocrisy Claims
Liberal Democrat Treasury spokesperson Daisy Cooper condemned what she called a "Conservative-Labour stealth tax stitch-up." She stated: "Rachel Reeves once accused the Conservatives of 'picking the pockets' of working people by freezing tax thresholds - now Labour plans to do exactly the same. That's rank hypocrisy."
The criticism comes despite Ms Reeves having previously declined to extend the freeze last year, claiming it would breach Labour's manifesto promise not to raise income tax, VAT or employee national insurance. However, with an estimated £20 billion black hole in spending plans, the Chancellor appears to have little choice but to change course.
Pensioners Get Inflation-Busting Increase
In contrasting news for pensioners, Ms Reeves has confirmed she will maintain the triple lock guarantee, resulting in a 2.5% increase to the state pension. This means approximately 13 million pensioners will see their weekly state pension rise to just over £240 per week.
The increase represents a £550 annual boost for pensioners, which is £120 more than if the pension had only been uprated by inflation. The triple lock policy, first introduced by David Cameron's government in 2010, ensures the state pension increases by the highest of inflation, average earnings growth or 2.5%.
Ms Reeves defended her approach, stating: "Whether it's our commitment to the triple lock or to rebuilding our NHS to cut waiting lists, we're supporting pensioners to give them the security in retirement they deserve."
The Chancellor is expected to unveil her full Budget on Wednesday, detailing how the government plans to "take the fair choices to deliver on the country's priorities to cut NHS waiting lists, cut national debt and cut the cost of living."
