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London families are paying £1,213 a year more on average in tax after 13 years of Labour government, independent research reveals today.
They are hardest hit from tax and benefit changes that have snatched £7.1 billion from family budgets across the country, equivalent to taking £270 from each British household.
Economists from the respected Institute for Fiscal Studies calculated that in Labour's first term in 1997 there was a government “giveaway” of £7.5 billion in extra spending.
But it was followed by a £6.4 billion “takeaway” in Labour's second term of 2001 to 2005.
Since 2005, the IFS found, the squeeze was stepped up, resulting in £8.1 billion being clawed into the Treasury from families, particularly wealthier households.
“The £8.1 billion takeaway in Labour's third term comes mostly from the richest households, with the incomes of the rest little changed on average,” said the organisation.
The average London breadwinner now pays 3.3 per cent more to the Government from their earnings than in 1997, or £1,213.66.
The figures take into account tax credits and other forms of increased support for the low paid.
No other region has been plundered as heavily as London and some, including Labour's North-East heartlands, are actually better off.
“We can see a pattern of losses on average for southern regions of England, the North-West and Wales,” said the IFS.
Even after removing the very wealthy from the calculations — the £100,000-plus earners, many of whom earn more than £150,000 and were clobbered by the new 50p tax rate that came in this week — Londoners are still paying more, by some £49.72 a week or 0.2 per cent of earnings.
The findings were published as arguments over tax dominated day two of election campaigning.
Much of the tax increase affecting London stems from rises in National Insurance, the same tax that Gordon Brown is planning to raise again next April and which the Conservatives say they will stop.
The extra tax bill is on top of what people would already pay because they are better off and may have moved into higher tax brackets, a phenomenon called fiscal drag.
The IFS claimed the “takeaway” over 13 years was arguably equivalent to £36 billion, or £1,400 per family, taking into account the way incomes had risen faster than benefits.
Labour's measures particularly benefited low-income families with children and pensioners receiving tax credits or means-tested benefits.
In a separate report, the IFS found that London household income levels had grown by 2.3 per cent since 1997.
But it said poverty was worse in the capital than anywhere else.
After adjusting for the higher cost of living in London, some 21 per cent of households were in relative poverty, which is defined as 60 per cent of median earnings.
That was down slightly from 23 per cent in 1997. Scotland had the lowest poverty level, at 14.6 per cent.
Reader views (8)
Tony from Hove said "Whats the issue here!"
Please explain why we should be paying more tax in real terms than were previously. Little, if anything has improved under Labour yet we are paying more tax.
- Mark (Will Never Vote Labour Again), South East London, 08/04/2010 08:59
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Val, Costas Mijas
Val, are you flying home via Ryanair? Two time loser my dear as flying Ranair is just like voting Labour...it always cots you more than you expected.
- Ronnie, what used to be England, 07/04/2010 16:10
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Let me see now £1200 over how many years. 13 lets call that 12. So tax has gone up by £100 for 12years. Doesn't seem like an astronomical increase to me?
How much different do you think another government would have made £500, £700 well the difference is tiny. Whats the issue here!
Perhaps it would have been good to post a comparison table over the last 50 years or so.
- Tony, Hove England, 07/04/2010 15:53
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Val - I'd say the media with the exception of the BBC is pretty neutral. The BBC on the other hand is a shameless drum beater for Labour. The BBC news is virtually a Labour party election broadcast these days. Operation Save Brown is in full swing there. Even Dr Who has been tainted by bias.
As for Brown making anyone richer (apart from Lords Mandleson and Prescott) thats laughable. All he has ever done is make each and every one of us who reside in the UK £24,452 poorer- you may not have noticed being a Non Dom.
The rich may not notice being fleeced but I assure you that us UK residents have noticed. We pay more and more taxes and receive less and less services.
Us UK residents are the most surveilled society on the planet and now Labour has given itself powers to spy on our mail, email, car journeys and every aspect of our lives. It's been 13 years of creeping assault on our civil liberties and I've had enough. Stuff your Labour Databases right up your ID card Biometrics.
So if Labour win uuurrghhhh,....you may just find more Brits coming out to your sunny offshore tax haven paradise. Move over Val - we may need some of your space there.
- Ethan, EUSSR - but I'd like the chance to seccede from the union, 07/04/2010 15:36
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Even in the 60s Labour were known as the Tax Party,just like Boris is known as the Tax the working class man with his 20% Tax on third world public transport.All politicians are greedy and do not give a darn about the average person.
- Dave, london, 07/04/2010 15:28
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the Lie Bore crooks have been robbing London and the South-East for over 12 years to pay for their friends in the North and to bribe Scottish voters not to vote SNP.
- Anglo, Sussex UK, 07/04/2010 14:30
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The IFS also said the recent poster issued by the Tories saying Gordon Brown had increased the gap between rich and poor was not true. That gap has decreased under Labour. I wonder if the Tories will now withdraw the poster; I doubt it. Why didn't you mention that in your piece. Fair unbiased reporting, my eye.
- Val Daniels, Mijas Costa, Spain, 07/04/2010 14:23
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Seems as if our only London Evening paper is following the London radio station LBC in giving out non stop Tory propaganda.
- Colin, barking essex, 07/04/2010 14:15
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