Cost of spending
Britons hit by biggest tax hike since 1950s
Britons are now experiencing the biggest increase in taxation since the 1950s, according to the latest analysis.
Since comparable records began after the second world war, no parliament has presided over a bigger increase in taxes. The record rise by the Conservatives since the election in 2019 will cost the equivalent of £3,500 per household.
Current forecasts indicate that by the time of the next general election, expected next year, taxes will amount to around 37% of national income, up from around 33% in 2019, says the Institute for Fiscal Studies.
It says Britain is making “a decisive and permanent shift to a higher-tax economy”, in a report that will put more pressure on Downing Street and the Treasury to reduce the burden on households and businesses.
Since the start of the 20th century, only during and in the immediate aftermath of the two world wars have total government revenues grown by as much as they have in the period since 2019.
Ben Zaranko, senior research economist at the IFS, said: “It is inconceivable that this parliament will turn out to be anything other than a tax-raising one – and it looks nailed on to be the biggest tax-raising parliament since at least the Second World War.
“This is not, for the most part, a direct consequence of the pandemic. Rather, it reflects decisions to increase government spending, in part driven by demographic change, pressures on the health service, and some unwinding of austerity. It is likely that this parliament will mark a decisive and permanent shift to a higher-tax economy.”
Mark Franks, director of welfare at the Nuffield Foundation, said: “Demographic change combined with slow economic growth is creating an almost inevitable increase in tax revenues as a share of GDP.
“There will be strong pressure in coming parliaments to raise taxes further to meet growing demand for public services such as healthcare.
“Future governments must not only have a credible and robust strategy for the economy and the public finances, but should also be forthright and transparent about the difficult trade-offs they will face.”
Chancellor Jeremy Hunt recently said that tax cuts in the forthcoming Autumn Statement were “practically impossible” because of the tight public finances and inflationary pressures.