The left-leaning Resolution Foundation says freezing income tax thresholds less progressive than raising income tax rates by 1p
Good morning. Rachel Reeves, the chancellor, has been speaking to broadcasters and defending her budget. It has not been easy because, although it went down relatively well with Labour MPs and the financial markets (no mean feat – those are two groups whose wishes don’t normally align), it is being hammered by the rightwing papers. Today is the day when the Institute for Fiscal Studies and the Resolution Foundation, the two leading public spending thinktanks, publish their detailed assessments, and they have reservations about some of the budget decisions too.
Reeves has been facing questions about breaking Labour’s manifesto promise on tax, which she insists she has not done. But the Resolution Foundation says would be better off if she had broken it. It explains:
The manifesto tax pledge has cost working people. Having previously hinted at raising income tax rates, the chancellor chose instead to freeze personal tax thresholds for three more years. But raising all rates by 1p would have been less costly than freezing thresholds for anyone with an income below £35,000. Indeed, all but the top 10% of the income distribution are worse off because of opting for threshold freezes over rate rises (which raise similar amounts of revenue).
