İşgücü, özel sektörün hayatını zora sokma riski taşıyor

Labour risks squeezing the life out of the private sector

Szu Ping Chan

Sat, August 22, 2026 at 11:00 AM GMT+3 4 min read

Labour's tax raid has proven painfully effective.

A decade-long squeeze on wages through frozen tax thresholds, which began under Rishi Sunak, the then Tory chancellor, and was later extended by Rachel Reeves, has steadily pushed millions of workers into higher tax bands.

But while the decade-long freeze has been damaging to households, it has also helped successive chancellors avoid even nastier tax rises.

Official figures showed John Healey borrowed £1.8bn to balance the books in July, despite economists predicting the Government would not need to tap the markets at all.

It means public borrowing so far this year is up £2.3bn compared with a year ago, largely because of higher welfare payments.

But stronger-than-expected tax receipts could yet save the day before October's Budget.

The Office for Budget Responsibility (OBR), the Government's tax and spending watchdog, said income tax and National Insurance, its two biggest revenue raisers, brought in £42.5bn in July. That's £1.6bn more than a year ago.

It means that just four months into the new tax year, income tax and National Insurance receipts are already £2.3bn above the fiscal watchdog's forecasts.

The OBR said on Friday that earnings growth had "slowed by less than expected...particularly in the public sector".

We have seen this pattern before. Jeremy Hunt, the last Tory chancellor, benefited from a similar effect in 2023 when the aftermath of the war in Ukraine pushed inflation into double digits and led workers to demand higher wages.

Faster wage growth combined with frozen tax thresholds helped to increase tax receipts by £60bn as people were forced to give more of their money to the taxman.

This meant that despite surging inflation pushing up debt interest and benefits by roughly £35bn, he was still left with a £27bn windfall.

Rachel Reeves enjoyed a similar boost last year. Even as Labour's last chancellor complained about an OBR downgrade to productivity that knocked £16bn off her headroom, stronger inflation and wage growth were quietly swelling the tax take.

Higher inflation once again boosted the cash size of the economy.

With personal tax thresholds frozen, Reeves was able to drag an additional £11bn into the Treasury's funds.

The result was that higher inflation and stronger wage growth turbocharged tax receipts, leaving them £16bn higher than forecast in March despite the downgrade to productivity.

But economists have warned that the Treasury cannot rely indefinitely on frozen tax thresholds or "fiscal drag" to keep balancing the books.

Martin Beck at WPI Strategy, said: "Private sector wage growth is already slowing sharply, meaning the raw material driving fiscal drag is becoming less plentiful.

"Unusually strong public sector pay growth cannot sustainably take its place when the Government is already struggling to contain spending."

He added that workers were starting to notice, and could act to cut their taxable income by boosting pension contributions, working fewer hours or even turning down promotions.

Corporation tax receipts have also been stronger than expected. The OBR said corporation tax receipts stood at £6bn in July, £1.1bn higher than a year ago and well above its forecasts.

It noted on Friday that stronger receipts were "consistent with robust profit announcements from both retail and investment banks in recent months".

This has fuelled speculation that Healey will launch a tax raid on the most profitable sectors in an effort to fund Andy Burnham's public spending plans.

The caution is particularly relevant for the financial services sector, which accounts for more than £1 in every £25 of UK economic output.

Jamie Dimon, the chief executive of JP Morgan, the world's biggest lender, recently warned Mr Healey against taxing banks more.

He said that such a move could push lenders overseas.

British banks already face one of the highest tax rates in the world at nearly 47pc, according to lobby group UK Finance.

In Amsterdam, the rate is 42pc, while Frankfurt charges 39pc and New York 28pc.

Against this backdrop, UK Finance warned that Germany planned to cut corporation tax by 1pc a year between 2028 and 2032, leaving Britain as an even bigger outlier.

It added: "At a time when peer jurisdictions are seeking to improve their competitiveness, it is vital that the UK's approach to both tax and regulation pull in the same direction, supporting investment and the sector's capacity to finance growth across the economy."

The figures serve as a warning.

If Healey keeps squeezing the private sector, he risks killing the very growth he is relying on to pay the bills.

Try full access to The Telegraph free today. Unlock their award-winning website and essential news app, plus useful tools and expert guides for your money, health and holidays.