The London based Resolution Foundation looked at 2025 pay and tax settings and put median employee earnings at £33,000, or $44,690. At that income, it says the effective tax rate is still below pre financial crisis levels. That leaves policymakers eyeing the middle of the income distribution if they want to fund more state activity. The review also points out that, since the pandemic, paychecks have been eroded by the freezing of personal tax thresholds.
The analysis assessed higher income OECD peers and left out lower income members, including Chile, Colombia, Costa Rica, Mexico and Türkiye. It found that in 16 advanced economies where the overall tax take is a larger share of GDP than in the UK, a single earner on average wages pays more than in Britain. A chart in the report, sourced to the Office for Budget Responsibility, indicates that government scope in Britain has expanded sharply since the 1990s, with the timeline presented on a fiscal-year basis.
In its initial two years back in office, Labour has set out tax increases, and chatter is growing about additional steps before Chancellor of the Exchequer John Healey unveils his first budget on Oct. 28. Healey faces limits because Burnham has vowed to adhere to Labour's 2024 manifesto commitment not to lift key taxes. Meanwhile, interest payments on the debt have risen over recent years, and overseas conflicts have moved defense spending higher on the agenda.
"There is a strong case that any benefits of increased defense spending will be broadly shared, so the tax rises needed to find this should be too, including higher rates on middles earners," said James Smith, the Resolution Foundation's chief economist. He cautioned that promising a larger state alongside lower taxes for average workers "is not being realistic."
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If the government moves ahead with higher defense spending alongside social care and housing ambitions, the hunt for broadly shared revenue gets more intense. The Resolution Foundation's bottom line: Britain still sits in the bottom third of the OECD for the tax level on an average worker, which makes middle earners a likely place to look if ministers need cash. Circle Oct. 28 for the first concrete clues on how that could show up in your take home pay next year.
