Millions of low and middle-income workers in the UK are financially worse off because the government chose to honour a key Labour manifesto pledge, a leading economic thinktank has revealed.
The Cost of a Pledge
According to a new analysis from the influential Resolution Foundation, freezing income tax thresholds instead of raising income tax rates has negatively impacted the finances of millions. The foundation's chief executive, Ruth Curtice, stated that it is ironic that adhering to the manifesto promise has ultimately cost these earners money.
"Millions of these workers would have been better off with their tax rates rising than their thresholds being frozen," Curtice explained. The policy means that as workers receive pay rises, they are dragged into higher tax bands, increasing their overall tax burden.
Budget Fallout and Broken Promises
This situation stems from the first budget delivered by Chancellor Rachel Reeves in November 2025. In her speech, she confirmed that the point at which people start paying higher rates of tax would be held, a move directly linked to the Labour Party's election promise not to raise taxes on working people.
However, critics argue the pledge has been broken in spirit, as the overall tax burden has increased by a substantial £26bn in this budget. This comes despite previous assurances from Ms Reeves that there would be no further tax increases.
Support Measures and Future Challenges
The Resolution Foundation did welcome some cost-of-living support measures announced in the budget. These included the removal of the two-child benefit cap and a reduction in energy bills. The Chancellor claimed energy bills would fall by £150 a year, though the foundation's analysis suggests a typical annual saving of around £130 for the next three years, with support fading after that.
Looking ahead, the thinktank warns that this budget is unlikely to be the last difficult one. The Office for Budget Responsibility (OBR) has downgraded its economic growth forecasts, presenting a significant hurdle for the UK economy.
"Until that challenge is taken on, we can expect plenty more bracing budgets," Ruth Curtice concluded, indicating that further fiscal tightening could be on the horizon for British households.
