The IFS think tank says the UK is on track to achieve record tax levels

The IFS think tank says the UK is on track to achieve record tax levels
  • Written by Joshua Nevitt
  • BBC Politics

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Taxes levied by the UK government have risen significantly since the Conservatives won the general election in 2019

The government is on track to oversee the largest tax-raising Parliament since records began, according to analysis by the Institute for Fiscal Studies.

The IFS expects taxes to reach about 37% of national income by the next general election, scheduled for 2024.

This would be a level not seen since 1948, just after World War II.

In response to the report, a Treasury spokesperson said that “the most effective tax cut we can deliver” is to “reduce inflation”.

“We have taken three million people out of paying taxes completely since 2010 by raising personal limits.”

Next year, the IFS says, the government will collect up to £100bn more in taxes than pre-2019 levels.

Some Conservative MPs are putting pressure on Chancellor Jeremy Hunt to cut taxes in the government’s autumn statement next month.

But Hunt said last week that tax cuts were “almost impossible”.

The IFS analysis is published on the eve of the Conservative Party conference in Manchester, which starts on Sunday.

Historically high

The IFS says the government currently collects more tax revenue, as a percentage of national income, than at any time since the 1940s.

In recent years, the government has announced a series of measures to increase taxes, including an increase in corporate tax from 19% to 25%, and a tax on profits made by energy companies.

Data on tax revenues only goes back to 1948, the IFS said.

The Institute for Fiscal Studies says that only during and immediately after the two world wars have government revenues – and not just those from taxes – grown by as much in this Parliament in the 123 years since 1900.

The analysis included a number of caveats, including the point that the UK’s overall tax level is “fairly average compared to other developed countries”.

Ben Zaranko, chief research economist at IFS, said the tax rate was not primarily a “direct result of the pandemic”, when government spending rose to keep the economy afloat.

“It reflects decisions to increase government spending, partly due to demographic change, pressures on health services, and some rollback of austerity measures,” Zaranko said.

“This parliament is likely to represent a decisive and lasting shift towards an economy based on higher taxes,” he added.

‘Light at the end of the tunnel’

Liz Truss and former ministers in her short-lived, economically troubled government launched the Conservative Growth Group in January to push forward with its calls to cut taxes and promote radical free-market economic policies.

In response to the report, Truss said: “This unprecedented high tax burden is one of the reasons for the stagnation of the British economy.”

John Redwood, another Conservative, said there were “affordable tax cuts”, including raising the VAT threshold for businesses and cutting fuel duties.

In an interview with the BBC on Thursday, Sunak said he believed halving inflation by the end of this year was the “most important” of the five pledges he made in January.

Inflation reached 10.7% in the three-month period between October and December 2022, which means the government aims to reduce inflation to 5.3%.

“Inflation is falling, there is light at the end of the tunnel, but we need to stick to the plan,” Sunak said.

Labor said the Tories had overseen “13 years of low growth and stagnant wages”.

Darren Jones, shadow chief secretary to the Treasury, said: “Brits are working hard, but they are being exposed to 25 Tory tax increases and a continuing Tory premium on their household budgets.”

The Liberal Democrats said the Conservatives had “broken the economy” under Truss and were “making the public pay the price”.

“This is the same party that promised not to raise taxes on people, and is now taxing families through the nose,” Treasury spokeswoman Sarah Olney said.

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