Rachel Reeves's 'fiscal drag' stealth tax will leave striving British workers £505 worse off by 2030 - but benefit claimants win big
Millions of workers will find themselves worse off by 2030 as Labour's tax policy 'quietly hammers' workers yet leaves benefits claimants and pensioners richer, a think tank has warned.
By SOPHIE CHURCH - POLITICAL REPORTER
Published: 00:11 GMT, 2 January 2026 | Updated: 02:17 GMT, 2 January 2026
Millions of workers will find themselves worse off by 2030 as Labour's tax policy 'quietly hammers' workers yet leaves benefits claimants and pensioners richer, a think tank has warned.
The effects of fiscal drag - where individuals are pushed into higher tax brackets by frozen income and national insurance tax thresholds - mean that a worker earning £50,000 today will be £505 worse off in real terms by 2030, despite their salary rising to £56,000 in that time.
As workers find themselves out of pocket, Labour's stealth tax raid will leave pensioners protected by the triple lock at least £306 better off, or £537 better off if they are exempted from income tax via the quadruple lock.
Similarly, benefits claimants will be up by £290 in real terms by 2030, thanks to Labour's increases to the standard rate of tax.
Meanwhile, those earning around £50,000, who will be hardest hit, face jumping from a 28 per cent to a 42 per cent combined tax rate on income earned over the higher rate threshold of £50,270.
Chancellor Rachel Reeves extended a freeze on income and national insurance tax thresholds until 2031 in her Autumn Budget - despite Labour pledging not to raise taxes on working people in its manifesto
A worker earning £50,000 today will be £505 worse off in real terms by 2030, despite their salary rising to £56,000 in that time
Daniel Herring, Head of Economic and Fiscal Policy at the Centre of Policy Studies, the think tank behind the new research, said: ‘Labour's tax policy is quietly hammering workers while protecting pensioners and benefit recipients.
'Freezing the personal allowance for income tax will hit everyone, but it’s those who are dragged into higher tax bands who will really suffer – to the point where a worker on £50,000 today is set to actually be poorer in five years’ time, despite getting pay rises.
'Meanwhile, the state pension and Universal Credit will both be worth more in real terms.
‘This is fiscal drag in action, raising taxes for millions of workers through the back door.’
Chancellor Rachel Reeves has been widely criticised for raising taxes by stealth after extending a freeze on income and national insurance tax thresholds until 2031 in her Autumn Budget - despite Labour pledging not to raise taxes on working people in its manifesto.