More and more people are paying a higher tax rate


Who is rich? The tax rate that people pay is certainly a good indicator. Yet under this Conservative government, two million more people are now paying income tax at 40% or 45% compared to 2019. The pain won’t end there either. By the time of the next election, some seven million workers will be in the 40p tax bracket. Unfortunately, it’s not a high-wage economy that’s coming, but an outright fiscal drag.

This is, of course, fantastic news for the Treasury, skimming more and more labor income – some £20billion more than forecast in the last Spring Budget. But this tax windfall represents a double betrayal for those who pay. Firstly, just three years ago Boris Johnson pledged to raise the threshold from 40p to £80,000, cutting taxes for three million workers. In fact, three million more have been dragged into the higher rate since 2010, when the Tories took power. Second, it has allowed those who are by no means wealthy, but who work hard for relatively low wages, to be confused with those who are obviously wealthy. These are the activists for whom the low-tax Conservatives of years past were a natural home. In the 1980s, only 5% were trapped in the 40p tax bracket. Now 20% are. What incentive do they have to get when so much of their payroll is taken by HMRC?

Allowing inflation to benefit large swathes of the population through higher taxes may be tempting, but it is both ideologically wrong and politically wrong. This is the territory on which the next elections will take place. And Tories playing with high taxes and government subsidies will find they cannot outbid Labor, the eternal masters of the game.

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