Labour’s income tax threshold freeze “breaks the spirit” of the party’s manifesto pledge not to increase levies on working people, Martin Lewis has said.
In her Budget on Wednesday, Rachel Reeves announced £26 billion of tax rises. The largest cash raiser will be the further three-year freeze on the thresholds for paying income tax.
Mr Lewis argued that if the Chancellor had put a penny on income tax instead, a plan she ditched in a screeching U-turn, then fewer workers would have been hit.
Speaking on GMB, the Money Saving Expert founder said: “We have been lied to by all politicians of all parties for 20 years that we can cut taxes and increase public spending.
“Well you can’t, and it’s such a shame Labour locked itself in because the truth is that a 1p rise in income tax would have probably hit people less hard than freezing the tax thresholds.
“But they’ve had to do it through, this stealth tax, because they pledged they wouldn’t rise income tax and I would prefer to see our government making decisions that work for people rather than having to play the political game.”
More than 500,000 people in London and the South East are expected to be dragged into paying the higher rate of income tax after the Budget.
Over the next two years, 150,000 more Londoners and 100,000 in the wider South East will end up paying the 40% rate under the freeze imposed by the Tories, or 250,000 in total, according to figures from the House of Commons Library.
Ms Reeves had been expected to continue the freeze for a further two years until 2029/30, which would have dragged an additional 110,000 people in London and 120,000 in the wider South East into paying the higher rate, or 230,000 in total.
So many people in the capital are now already paying the 40% rate as the freeze has tightened its grip on millions of employees.
During a morning media round, Ms Reeves hit back at critics, saying she would not allow them to “write my obituary”.
But she faced a wave of questions about her tax hikes used partly to pay for around £8 billion more in benefits.
Business leaders in London have stressed that the run-up to the Budget, with an array of briefings about possible tax rises, had had a “chilling effect” and had cost jobs in the capital.
Ms Reeves sought to defend herself, stressing that the manifesto was “very clear it was the rates of income tax, national insurance and VAT” that would not be raised.
But she added: “I’m not going to get into semantics. I recognise that we are asking people to contribute more by freezing those allowances.”
