An internal government memo was leaked recently which exposed the deceitful ways workers are being silently taxed more than ever, while the government can simultaneously celebrate that it didn’t raise taxes at all. It’s a devious, deliberate attack on living standards and affordability for the average citizen, and it’s important to understand how this is happening before they wrap it up as a positive for the people of the country. 

What’s Happening?

A letter between Angela Raina, the Deputy Prime Minister, and Rachel Reeves, the Chancellor, discussed ways in which she could collect more tax. Item four on the list stated “continuing to freeze the additional rate tax threshold in cash terms, rather than uprating it with inflation, could raise revenue and will be consistent with the manifesto”. 

Despite sounding like it only affects the rich, it actually makes a huge difference to everybody. This is the single largest tax grab since the 1970s, and hits anyone earning more than £12,570 a year. Teachers, nurses, and tradespeople – not just the additional rate tax payers as it would have you believe. 

What’s worse than deliberately embracing fiscal drag – a tactic deployed to freeze tax thresholds while wages rise – is that it directly contradicts a 1977 law known as the Rooker-Wise Amendment, which mandates that tax thresholds must rise with inflation every year. Initially, this stopped politicians quietly taking more of your wages without transparently increasing tax rates. 

This is not about numbers, or even wages. It’s about trust. The UK is a country already weary from politics, and now the quiet dismantling of a law meant to keep taxation honest is a big warning sign – even Labour’s own supporters are not happy. 

Before we go into this, remember that fiscal drag is not a new concept, but the problem here is that tax brackets once legally bound to increase with inflation are being deliberately frozen to trick you into giving the government more of your hard-earned cash. And of course, they aren’t telling you about it. 

How Fiscal Drag Works

For those new to the concept, Fiscal Drag refers to income tax bands not moving in line with inflation. Essentially, wages go up in order to keep pace with increasing prices, which only really means more of your income gets taxed as a higher portion now lands in the existing tax thresholds. 

On paper, tax rates remain the same. In reality, you pay more of it, and the government gets to flaunt that wages have increased while tax hasn’t. But, in real terms, the amount they earn from tax increases drastically. It’s the political equivalent of a magician’s sleight of hand – distracting you with promises of living standards, frozen tax rates, increased wages – while quietly picking your pocket. 

A quick example of this is a person earning £50,000, meaning they are currently in the 20% tax threshold but on the cusp of moving into the 40% higher rate band. If inflation jumps 10%, living costs rise by £5,000. Their employer may increase their wage by £5,000 to match this increase and maintain the living standards. 

In doing so, however, this person pays 40% tax on most of the extra £5,000 salary, meaning a real-terms gain of around £3,000. So, not only does this person now have a lower salary relative to the cost of living, but they’re also now paying more tax than before. Net loss for the employee, net gain for the government. 

Why It’s a Double Win for the Government

It’s a dream tool for politicians, because it works on two fronts: 

• More revenue, no backlash: they can generate billions in extra tax without having to admit they’re raising taxes – because technically they aren’t – and so the public fury that comes with direct tax hikes is avoided 
• Spending power without honesty: the generated cash can be used to fund new spending, or plug deficits, meaning they can pretend to protect living standards, while increasing new spending and celebrating they’ve managed it without increasing income tax or borrowing 

It’s a political fairytale. Silently, tax increases on everyday workers at the same time that they say it isn’t. And technically, they are not lying in terms of rates or thresholds, but it’s devious and misleading as everybody ends up paying more of it. 

This is what’s so dangerous about it: taxation without transparency or consent. We never agreed to it, most don’t know it’s happening, and others don’t even understand the concept. 

The Rising Toll on Ordinary Workers

Another way to look at this is to consider how many people fall into these tax brackets compared to before. In 1991-92, only 3.5% of UK adults paid the 40% higher rate. In 2022-23, it was 11%, and in the next couple of years, we’ll hit 14%. That’s quadruple the early 90s.  

25% of teachers will soon be paying higher rate tax, which is five times more than the 5% who did in 1991-92. Even a decade ago, almost zero nurses paid it, but over 10% will fall into the bracket by 2027-28. These have not become high-paying jobs in real terms, and the people doing these jobs are not better off than before – but inflation and frozen thresholds have made them appear so, meaning they have to pay more back to the government. 

Even the lowest earners are paying for this. If the £12,570 personal allowance had risen with inflation, as it should by law, it would now be £15,220. Instead, it’s frozen, meaning everybody earning £15k+ is guaranteed to be at least £500 out of pocket annually. 

The gap at the higher end is even more striking. Adjusted for inflation since 1997, the 40% threshold should now be £76,632. If it was proportional, meaning we should aim for the same number of people to fall into the 40% bracket as before, this would now be approximately £100,000. Instead, it’s just over £50,000. Thousands and thousands of extra tax pounds are being charged to the middle-class professionals – who certainly don’t feel like they are suddenly rich. 

The Bill That Makes Billions – And Nobody Voted For It

In 2021 when the freeze was initially announced, the Office for Budget Responsibility (OBR) predicted an additional £8 billion would be raised annually. This has already increased to £27 billion. By 2030, this will be £38.6 billion.  

To imagine how vast that tax increase is: it’s a bigger income generator than inheritance tax, alcohol duty, and tobacco duty put together. Spread across all UK households, it’s a total increase of £1,359 per year. 

The most important part here is that nobody voted for it. It was never sold to the public as a deliberate tax rise. It crept in, hidden inside a budget announcement, meaning politicians could boast that they actually held the line on tax rates while the real take soared. 

Politics of Pretence

The Conservatives froze the bands during Covid-19, which Labour criticised at the time – now they’re thinking about keeping it. 

Temptations are obvious. Billions a year in extra revenue, without any public political pain? It seems that even Labour are finding it hard to resist. But really, it feeds into a growing, more dangerous trend: that people are realising all politicians may well be the same.  

For voters disillusioned with politics, this confirms that promises mean nothing. Those who backed Labour for change in policies such as these are finding their pay packets are still shrinking in real terms, by a party they expected to act differently. 

Why It’s So Important to Understand

Fiscal drag is not a technical, abstract issue. It affects everyone who pays income tax, and erodes your real income annually even if you’re getting promoted at work. 

It also corrodes democracy. The Rooker-Wise Amendment existed to make sure tax changes were transparent, debated and clearly understood. By choosing to bypass it, governments can operate in secret, harming the quality of life for its citizens, and later flaunt their so-called protection of living standards. 

Sneaky. Cynical. Devious. But incredibly effective. 

When you read a headline saying “Government rules out tax rises”, remember that their frozen thresholds are already doing the job for them. And it works better than any overt increase ever could. 

Final Thought

The fact that the UK government is still considering extending this hidden cash-grab is shocking, especially considering their previous opposition to it. It’s the ultimate political con, hiding in plain sight, dressed as fiscal responsibility, but really draining billions from the working people of the country. The UK is already jaded by broken promises, and this kind of cynical manoeuvre deepens distrust further. 

If you’re looking for honesty in taxation, you need to ignore the rates. Look at the thresholds, which tell the true story of how much you’re being forced into contributing. 

Join the Conversation

Is fiscal drag a necessary tool for balancing the books, or a betrayal of the public? Should thresholds always rise with inflation as the law intended? Tell us your thoughts below. 

The Expose Urgently Needs Your Help…

Can you please help to keep the lights on with The Expose’s honest, reliable, powerful and truthful journalism?

Your Government & Big Tech organisations
try to silence & shut down The Expose.

So we need your help to ensure
we can continue to bring you the
facts the mainstream refuses to.

The government does not fund us
to publish lies and propaganda on their
behalf like the Mainstream Media.

Instead, we rely solely on your support. So
please support us in our efforts to bring
you honest, reliable, investigative journalism
today. It’s secure, quick and easy.

Please choose your preferred method below to show your support.