Workers will pay for the government's VAT cut "many times over", commentators said today, following the announcement of an increase in national insurance contributions.
In his pre-budget statement to MPs the chancellor, Alistair Darling, announced a 0.5% increase in national insurance contributions effective from April 2011 for those earning more than £20,000.
Tax experts say the move will hit many middle-income workers.
"The short-term benefit this year and next year from the VAT giveaway of £12.4bn will be paid for many times over by workers from April 2011," said Ruth Dooley, tax partner at Grant Thornton.
"The national insurance increases are likely to be a much longer-term change reaping the Treasury more than £5bn each year."
Carolyn Steppler, associate partner at KPMG, said many workers would end up paying more tax, despite changes in personal allowances also announced today.
"While the increase in the personal allowance and NI lower earning contributions will save somebody earning £30,000 a year approximately £118 now, this will be wiped out by the 0.5% NIC increases," she said.
"This is a classic case of jam today, dripping tomorrow."
Treasury officials confirmed the 0.5% increases in both employers' and employees' NICs mean all families earning more than £40,000 a year will pay more as a result of the pre-budget report.
They said those earning between £40,000 and £100,000 would be an average of £3-a-week worse off by 2010.
Delivering his pre-budget statement, the chancellor confirmed plans to introduce a new 45% tax rate for high earners and said he would be making other changes to the way income tax is paid.
He said that from April 2011 those people earning more than £150,000 a year would face a new tax rate of 45p in the £1. The move will affect the top 1% of incomes.
Darling said he would also change the personal allowances of high earners to end the anomaly of these being worth twice as much to high-rate taxpayers as those who pay basic-rate tax.
The personal allowance, which is currency set at £6,035, is the amount of earnings on which no tax is payable. Currently all taxpayers have the same allowance.
The chancellor said that from April 2010 those people earning between £100,000 and £140,000 would have their personal allowances halved so they received the same benefit as those earning less.
For taxpayers earning more than £140,000 he will withdraw the allowance entirely. The change to personal allowances will affect 2% of earners.
Darling also announced plans to make permanent this year's increase in the income tax personal allowance of £120 a year for basic rate taxpayers.
From April, the personal allowance for those under 65 will be increased by £145. This is in addition to the £600 increase this May, and raises the total to £6,475.
Taxpayers aged between 65 and 74 will see their personal allowance increase in line with inflation to £9,490, while those aged 75 and over will get an annual allowance of £9,640.
The government said this meant that from April 2009 anyone aged 65 could earn up to £182 a week before being taxed.
However, some of those who lost out when the 10p tax rate was abolished in April this year have still not been compensated for their losses.
"While the chancellor announced an increase in compensation for very low earners, he still has not made good the whole shortfall," Steppler said. "Having lost out to the tune of £223, the compensation now amounts to £148. So in a sense, the chancellor still owes them £75 each."
Richard Mannion, national tax director at accountancy firm Smith & Williamson, said the more wealthy could face "substantial" tax rises, with a person earning £140,000 paying over £1,200 more tax as a result of the new personal allowance.
"An individual currently earning £200,000 [a year] will suffer a double whammy: the loss of their personal allowance will cost them over £2,400 [a year], plus it appears the impact of the 45% income tax rate will cost them an additional £2,500."
However, Lisa Harker co-director of the IPPR, described today's report as "the most redistributive budget statement of the last 30 years".
"By introducing a higher rate of tax, raising national insurance contributions, rebalancing and increasing personal tax allowances and enhancing child and pensioner benefits, the tax burden will be shifted away from those who can least afford to shoulder it."