Sunak and Johnson have overseen largest tax rises since Second World War – thinktank

Politics

Rishi Sunak and Boris Johnson have overseen the largest set of tax rises since the Second World War, according to economic analysis.

The Institute for Fiscal Studies (IFS) estimates that – by the time of the next general election – the tax burden will have risen to around 37% of national income.

This equates to roughly £3,500 extra per household – although the increase is not shared evenly.

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Records began in 1950 for the figures, and no parliament has seen a larger hike.

The size of the tax burden and the lack of cuts to tariffs have been the subject of the ire of many Conservatives.

The headroom for tax cuts has suffered as interest rates rose and the cost to service debt has risen. High inflation has led the government to be cautious of cutting taxes and leaving people with more cash to spend.

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Last week, Chancellor Jeremy Hunt said it would be “virtually impossible” to cut taxes at the moment.

“I really, really wish it was true but unfortunately, it just isn’t,” he told LBC.

“If you look at what we are having to pay for our long-term debt, it is higher now than it was at the spring budget.

“I wish it wasn’t, it makes life extremely difficult, it makes tax cuts virtually impossible, and it means that I will have another set of frankly very difficult decisions.

“All I would say is, if we do want those long-term debt costs to come down, then we need to really stick to this plan to get inflation down, get interest rates down.

“I don’t know when that’s going to happen. But I don’t think it’s going to happen before the autumn statement on November 22, alas.”

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There will likely be pressure for Mr Hunt and Mr Sunak to cut taxes – with some eyeing up cuts to sizeable projects like HS2 as a way to free up cash, and others calling for a relaxation of inheritance tax.

The economy is an area that Mr Sunak wants to make his strength – with three of his five pledges made at the start of this year relating to them.

Ben Zaranko, senior research economist at the IFS, said the pandemic could not be blamed for rising tax levels and predicted a high-tax approach was here to stay regardless of who wins the next general election.

“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,” he said.

“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.”

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‘The plan is working’

This was echoed by Mark Franks, the director of welfare at the Nuffield Foundation.

He said: “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.”

Opposition parties seized on the findings, as Labour said that the Tories had “clobbered” the public.

Shadow chief secretary to the Treasury Darren Jones said: “Successive Tory governments have overseen 13 years of low growth and stagnant wages. Their response in the face of this bankrupt legacy is always to load their failure onto working people. And what are we getting back? Crumbling public services.

“Brits are working hard but getting clobbered with 25 Tory tax rises and a continuing Conservative premium on their household budgets.”

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A Treasury spokesperson said: “Despite needing to take the difficult decisions to restore public finances in the face of the dual shocks of the pandemic and Putin’s illegal invasion of Ukraine, the latest data shows our tax burden will remain lower than any major European economy.

“Driving down inflation is the most effective tax cut we can deliver right now, which is why we are sticking to our plan to halve it, rather than making it worse by borrowing money to fund tax cuts.

“We have also taken 3 million people out of paying tax altogether since 2010 through raising personal thresholds, and the chancellor has said he wants to lower the tax burden further – but has been clear that sound money must come first.”

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