The Institute for Fiscal Studies (IFS) think tank has projected that the UK is heading towards record-breaking levels of taxation. According to their analysis, the government is on a trajectory to oversee the highest tax collection in parliamentary history, dating back to records from 1948.
The IFS predicts that taxes will comprise approximately 37% of the national income by the upcoming general election scheduled for 2024. This level has not been witnessed since 1948, shortly after World War Two.
In response to this report, a spokesperson from the Treasury emphasized that the most impactful way to provide tax relief is by addressing inflation.
They pointed out that since 2010, the government has already removed three million people from the tax rolls by raising personal income thresholds.
The IFS report also highlights that in the next year, the government is expected to collect over £100 billion more in taxes compared to the levels seen before 2019.
Some Conservative Members of Parliament are urging Chancellor Jeremy Hunt to consider tax reductions in the government’s forthcoming autumn statement. However, Hunt recently stated that tax cuts are presently “virtually impossible.”
The IFS analysis comes just ahead of the Conservative Party Conference in Manchester, beginning on Sunday. The IFS further notes that the government’s tax revenue, as a percentage of national income, is currently at its highest point since the 1940s.
In recent years, the government has introduced various tax-raising measures, including raising the corporation tax rate from 19% to 25% and imposing levies on energy company profits.
The IFS analysis does acknowledge that when compared to other developed nations, the overall tax burden in the UK is relatively moderate.
The IFS’s senior research economist, Ben Zaranko, attributes the increased tax rate not solely to the pandemic but also to decisions made regarding government spending, demographic shifts, healthcare pressures, and the gradual reversal of austerity measures.
This analysis suggests that the current parliamentary term may represent a lasting transition to a higher-tax economy.
In response to the report, Conservative figures like Liz Truss and John Redwood have advocated for affordable tax cuts, including raising the VAT threshold for businesses and reducing fuel duties.
Chancellor Rishi Sunak has emphasized the importance of halving inflation by the end of the year, among his five key pledges made earlier in the year.
He cited progress in lowering inflation and underscored the need to adhere to the government’s economic plan.
Labour criticized the Tories for overseeing “13 years of low growth and stagnant wages,” while the Liberal Democrats accused the Conservatives of “crashing the economy” and burdening the public with increased taxes.
Last Updated: 29 September 2023