“Across the forecast, if you take into account the different tax changes, the tax burden continues to rise, and the average family will be £870 worse off at the end of the forecast period”

That was the claim from Labour’s Rachel Reeves on Radio 4 on Thursday.

The shadow chancellor was responding to Wednesday’s budget, in which Jeremy Hunt cut National Insurance Contributions (NICs) from 10 per cent to 8 per cent.

FactCheck takes a look.

Will ‘the average family’ be ‘£870 worse off’?

The £870 figure is based on Labour’s own calculation, using figures from the government spending watchdog, the Office for Budget Responsibility (OBR).

The party has compared the extra money the government will receive from income tax and NICs rises announced since 2019 with the tax cuts introduced over the same period.

On this basis, Labour calculates the government will be taking an extra £19.7bn in personal taxes by 2028-29. That’s the year the “forecast period” Rachel Reeves is talking about comes to an end.

Labour has added to that the government’s policy to allow councils to raise council tax more easily, which the OBR says will put an extra £4.9bn in the public coffers by 2028-29.

All told, Labour calculates we’ll be paying a combined £24.6bn more in tax in 2028-29 as a result of these policy changes.

Labour divides this by the 28.2 million households in the UK (using the latest 2022 data from the Office for National Statistics) to reach a figure of £872 per household.

The independent Institute for Fiscal Studies (IFS) think tank told FactCheck that the number “isn’t unreasonable” but “isn’t the whole story either”.

It’s “debatable”, the IFS said, whether council tax should have been included in the calculation – as the changes the government introduced simply allow local authorities to raise rates if they want to, rather than the government requiring a change or imposing it directly.

Removing council tax rises from Labour’s calculation would leave it with a figure of £700 rather than £872.

And the party has left out some of the tax changes announced in this week’s budget, which the IFS describes as “legitimate, but a choice”. For example, Labour hasn’t accounted for “announcements on child benefit (a tax cut) or on non-doms (a tax rise) – even though both of those are actually income tax changes”.

More importantly in terms of the overall number, the party has left out cuts to fuel duties – a tax giveaway the IFS says “would significantly lessen the average tax rise”.

How will our finances change overall?

More generally, being worse (or better) off financially isn’t just about taxes.

There’s no single perfect measure, but economists often look to “real disposable household income” as a guide. That’s the money you earn from work and benefits minus the amount you pay in taxes – all of which is then adjusted for inflation.

The OBR says that despite the increases in income tax, NICs, other taxes and the cost of living, real household income per person will be about £800 higher in 2028-29 than it was 2019-20.

That means the average person will be £800 better off – over and above the tax rises Labour’s focusing on in its analysis. (And that’s per person, whereas Labour was calculating a per household figure.)

Most of this is driven by a projected rise in earnings, which cancels out those tax rises and leaves the average person with more money in their pocket.

We should note, however, that people will be worse off on average at the end of “this parliament” than they were at the start by this measure. That’s the time between the last general election (2019) and the next one, which will have to happen by January 2025. But it’s not the period Rachel Reeves was talking about, which went up to 2028-29.

FactCheck verdict

Labour’s Rachel Reeves said that the average family will be “£870 worse off” in 2028-29. The calculation is based on changes to income and council taxes announced since the last election, which will rise overall despite the government’s latest cut to National Insurance.

But being worse (or better) off isn’t just about tax. While it’s not perfect, economists often look to “real disposable household income” as a guide. This takes account of rising wages and benefits as well as changes to the tax system.

The Office for Budget Responsibility (OBR) says that on this measure, the average person will be about £800 better off in 2028-29 than they were in 2019-20 – even despite tax rises and the cost of living.

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