Newspaper article The Evening Standard (London, England)

Pay Squeeze That Is Hitting the High Street

Newspaper article The Evening Standard (London, England)

Pay Squeeze That Is Hitting the High Street

Article excerpt

Byline: ANTHONY HILTON

THE hollowness of the Government pledge not to increase income tax was revealed yesterday in official figures which showed most people were worse off last year than 12 months previously because pay after taxes had fallen for the first time in 15 years.

Official figures published by the Office of National Statistics and the Department of Work and Pensions confirmed officially what tax experts and pundits had been saying for some time - that the impact of higher National Insurance charges, the refusal of Chancellor Gordon Brown to increase personal allowances in line with inflation and the further imposition of big council tax rises on most homes would together outweigh any pay increases for the average household.

Without these additional tax burdens people's incomes would have improved by a modest 0.9 per cent, with them they fell. Worst hit - with a drop of one per cent - were middleclass families earning around [pounds sterling]27,000.

Tax experts at the Institute of Fiscal Studies and elsewhere have been predicting this effect since the Chancellor announced his tax hikes in the Budget before last.

Although economic growth has been steady at 2.5 to three per cent for some years, the decision taken in Labour's second term massively to increase spending on schools and health means taxation has risen faster than national income for the last three years.

A squeeze on personal incomes was and is the inevitable result given that tax can only come in large amounts from individual pay packets, from company profits and from sales taxes .

Nor is this likely to be a one-off year. Figures from the institute which emerged at the time of the recent Budget suggest that the rate of growth in incomes over the next five years will be barely half that experienced in the last five.

And it seems that the squeeze will get worse as the decade goes on. Again, the cumulative effect of higher taxes is the reason but the implication for the country as a whole is, if anything, more severe than it has been in the last 12 months. …

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