Budget of broken promises: Labour’s £2,237 tax bill for working people every year

New analysis of official figures published alongside Labour's Budget of broken promises shows that that the average working household could face a £2,237 tax bill every year. 

This would represent a total tax bill of over £9,700 per working household over the next five years. 

As result of this bombshell revelation, the Conservatives have today written to the UK Statistics Authority (UKSA) to report themselves for underestimating the burden that households could face. 

During the election the Conservatives argued that a Labour government would raise taxes for every working household by £2,094 over four years, based on costings of the opposition's policies – with an estimated blackhole of £38.5 billion (over a four-year period) in their plans that will need to be filled by tax rises. 

However, Labour budget confirmed that the total tax policy decisions would actually be £41.2 billion a year by 2029-30, significantly larger than the blackhole the Conservatives estimated Labour would have to cover through taxes at the election.   

The Conservatives have admitted to the UKSA that they have made a mistake by taking the Labour Party's claims at face value during the election and sought to correct the record.  

In the letter, written to Sir Robert Chote, Chairman of the UKSA, former Treasury Minister, Andrew Griffith MP, writes: 

“I'm writing to you following the Budget to correct the record on some statistics that were used before and throughout the election campaign.  

On the 17th May the Conservative Party presented a dossier entitled ‘Labour's Tax Rises' to the public. This was predominantly based on a collection of HM Treasury costings which were undertaken using the formal Opposition Costing process that governments of all stripes have utilised. 

Our dossier made the assertion that Labour's policy commitments led to a black hole of over £10 billion a year by 2028-29 or nearly £38.5 billion over the next four years. This meant that the total burden on working households across the 4 years of a typical Parliament would be £2,094. 

While we were confident in the use of this figure, I note that you wrote to the then-Chairman of the Conservative Party stating that ‘when distilling these claims into a single number, there should be enough context to allow the average person to understand what it means and how significant it is'.  At the time, the now-Prime Minister referred to such claims as ‘lying' and accused us of doing so ‘deliberately'. 

I regret to inform you that it now appears the £2,094 per household number is misleading.   

In fact, the correct position appears to be significantly higher than this. After the Chancellor of the Exchequer's Budget on 30 October 2024, it's clear that the per-household cost of Labour's tax plans is in fact £2,238 – and this figure is for each year, rather than across a parliament.

I regret that this mistake occurred and that we - like so many people across the UK - took at face value the Labour Party's claims at the election.” 

ENDS 

Notes to Editors 

Labour's budget sets out that it will rise to the highest-ever level: 

• The tax burden will rise to 38.2 per cent of GDP by 2028-29 – surpassing the highest level in our country's history. The OBR confirm that Labour's Budget has taken the tax burden to 38.2 per cent of GDP in 2028-29, exceeding the record high set in 1948 which was 37.21 (OBR, Economic and Fiscal Outlook, October 2024, 30 October 2024, link). 

The impact of Labour's budget of broken promises will raise tax on working families by £2,237.50 

• Rachel Reeves has raised taxes by £41.2 billion at this Budget which is equivalent to £2,237.50 per working household. The total impact of Labour's tax policy decisions in 2029-30 is £41,170 million. There are 18.4 million working households in the UK where at least one person is in work(HMT, Autumn Budget 2024, Table 5.1 Autumn Budget 2024 policy decisions (£ million), p.127, 30 October 2024, link; ONS, Households by combined economic activity status of household members, 30 August 2023) 

Methodology: £2,237.50 is derived by dividing the total tax policy decisions value by the number of working households to reach this aggregate figure. 

• The rate of inflation is higher in every year of the OBR's November forecast compared to March 2024. The OBR confirm inflation will be 2.5 per cent in 2024, 2.6 per cent in 2025, 2.3 per cent in 2026, 2.1 per cent in 2017, 2.1 per cent in 2028 and 2.0 per cent in 2029 (OBR, Economic and Fiscal Outlook, October 2024, 30 October 2024, link).  

• The OBR has downgraded growth by 0.7 per cent across the next five years compared to the OBR forecast in March. The OBR have downgraded the growth rate by 0.7 per cent over the next five years. It predicted the economy will grow 1.1 per cent in 2024, 2.0 per cent in 2025, 1.8 per cent in 2026, 1.5 per cent in 2027, 1.5 per cent in 2028 and 1.6 per cent in 2029' (OBR, Economic and Fiscal Outlook, October 2024, 30 October 2024, link).  

• Labour have announced a £25 billion tax raise that the IFS have said will hit on working people. ‘Employer NI up by 1.2 to 15 per cent. Threshold cut from £9100 pa to £5000. That is a £25 billion tax rise, proportionally hitting harder those employing lower paid workers. Probably three quarters or so of the increase will flow through to lower pay'. The total amount of national tax has risen. Comparing the total national account taxes from Labour's Budget to the previous OBR forecast indicates an increase in collected tax of 67.8 billion in 2027-28, this is equivalent to £3,684 per working household. (Paul Johnson, Twitter, 30 October 2024, link; OBR, Public Finances Databank, October 2024, 30 October 2024, link).

• Labour's jobs tax hike will result in fewer jobs. The OBR confirms: ‘The employer NICs rise is estimated to reduce labour supply by 50,000 average-hours equivalents, while the net fiscal loosening would crowd out some private investment in an economy with little spare capacity' (OBR, Economic and Fiscal Outlook, October 2024, 30 October 2024, link).  

Labour promised they would not raise taxes:  

• Every single Labour MP stood on a manifesto not to raise taxes on working people. Labour's manifesto reads: ‘Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT' (The Labour Party, Change Manifesto 2024, 13 June 2024, link).  

• In 2021, Rachel Reeves referred to an increase in employer National Insurance as a ‘jobs tax'. REEVES: ‘That is one of the reasons it is so worrying that, at this crucial time, the Prime Minister and the Chancellor concocted a new jobs tax to arrive in the spring. Despite all their election promises to cut national insurance contributions, they are actually raising them against the strong advice of businesses and trade unions' (Hansard, 19 October 2021, Vol. 701 Col. 676, link).

• Keir Starmer said a rise in National Insurance will ‘hit working people'. ‘The national insurance tax was a deliberate decision to hit working people, and it will hit working people. So the idea that they're the party of working families is ridiculous, and it's not an argument that can be sustained on any analysis whatsoever' (Daily Record, 21 October 2021, link).

Labour said their plans did not require any ‘further' tax rises outside of their manifesto:  

• Rachel Reeves said Labour's plans ‘don't require any further increases in taxes' other than the tax rises set out in Labour's manifesto. STUDIO: ‘Now at the event here in Derbyshire. You just said that there are no additional tax rises needed beyond the ones that are set out. How long does that promise last for?' REEVES: ‘Well, our manifesto sets out what we would like to do in the next Labour government and all of our promises. The 40,000 additional appointments a week in the NHS, the 6500 additional teachers in our schools. All of those are fully costed and fully funded. They don't require any further increases in taxes' (Sky News, 28 May 2024, archived).  

• Keir Starmer said there would be no new taxes under Labour. STUDIO: ‘There are going to be no tax rises and no spending cuts under a Labour government?' STARMER: ‘Where there are tax rises, we have set out what they will be and what the money will be spent on' (Times Radio, 24 May 2024, archived).  

Labour promised they would not fiddle the fiscal rules:  

• Rachel Reeves said she would not ‘fiddle the figures' to get a different debt figure. In November 2023, when asked about fiscal rules, Rachel Reeves told reporters she was ‘not going to try to fiddle the figures or make something different to get better results. We will use the same models the government use' (Bloomberg, November 2023, link; Philip Aldrick, Twitter, 3 August 2024, link).

Labour said everything was ‘fully funded' within the ‘economic inheritance' they would receive:  

• Rachel Reeves claimed everything was ‘fully funded' within the ‘economic inheritance' she would receive. REEVES: ‘I make no apologies for ensuring that our plan is fully costed, fully funded and deliverable within the inheritance we're going to get' (BBC Breakfast, 8 February 2024, archived).