Does it feel like you are paying much more tax than you used to? It could be because Gordon Brown, the Chancellor of the Exchequer, has subtly added the equivalent of 7p in the pound to the basic rate of income tax since Labour came to power in 1997.

By increasing income tax thresholds only in line with prices, rather than the growth of the economy, Mr Brown has made the UK’s 28 million workers pay £29 billion more than they would otherwise have done. An extra 1.5 million workers are also paying tax in the 40 per cent band, compared with 1997.

Maurice Fitzpatrick, an economist at Grant Thornton, the accountancy firm that calculated the figures, says: “Although the Chancellor has reduced the basic rate of tax and introduced the lower 10 per cent band, his failure to raise the thresholds in line with growth means that we are all paying a lot more in tax as a proportion of our income.”

Economists describe this method of raising tax as fiscal drag. “Fiscal drag is the ultimate stealth tax,” Mr Fitzpatrick says. “It is the equivialent of the Chancellor picking your back pocket before you notice.”

Mr Brown has also applied the revenue-raising potential of fiscal drag to other taxes, such as stamp duty and inheritance tax. When Labour came to power, the average house price was £68,085, according to Halifax. By the end of last month this had shot up to £192,233, an increase of 182 per cent. Yet, while house prices have more than doubled, the stamp duty thresholds — with the exception of the lower-rate band — have remained unchanged and the rates payable on the higher bands have doubled. This means that stamp duty revenue has increased by an astonishing 582 per cent to £4.6 billion since 1997.

Increasing house prices also mean that more estates are liable to pay inheritance tax (IHT). The threshold at which an estate must pay the 40 per cent tax has increased by only £70,000 to £285,000 since 1997, significantly less than the growth in earnings or house prices. The result is that revenue from IHT has more than doubled since 1997.

Most people do not notice the effect of fiscal drag — particularly on income tax — because the increases are not explicit and they happen over such a long period of time. The impact is also lessened by our increased prosperity since 1997, despite higher taxes. Figures from the Office for National Statistics show that average household disposable income — the amount that we have to spend after taxes are deducted and benefits added — rose from £17,397 in 1997 to £25,360 in 2005, an increase of about 15 per cent in real terms.

Even though we are better off, our “buy now, pay later” culture means that we are borrowing more and saving less. Since 1997 the total amount invested in private pensions has reduced as a proportion of gross domestic product from 122 per cent to 118 per cent. The savings ratio — the proportion of our disposable income that we put aside each month — has also declined, falling from 10 per cent to 5.3 per cent.

Meanwhile, total debt has increased by 160 per cent to almost £1.3 trillion — equivalent to almost seven times the yearly output of Nigeria. Indeed, some economists argue that it is only our appetite for debt-fuelled consumer spending that has kept the economy afloat.

Mr Fitzpatrick estimates that between 0.5 and 0.75 percentage points of the 2.8 per cent average growth rate of the past ten years has been fuelled by debt. But he also points out that the country has become more solvent with gross household wealth growing to £3.8 trillion — three times more than we owe.