Families in the UK are on course to have £3,500 less in their bank accounts next year ahead of the General Election due to future tax rises, claimed a leading economics thinktank
Families could have as much as £3,500 less to spend next year due to tax rises ahead of a General Election, a leading economics thinktank has claimed.
The country is on course for the biggest percentage tax increase over the course of a parliament in more than 70 years. Tax revenues were 33 per cent of the national income at the last election and this could rise to 37 per cent.
The next election is scheduled to be held no later than January 28, 2025, and the Institute for Fiscal Studies said the government was on track to raise £100bn more with the 37 per cent increase by next year. This is the equivalent of about £3,500 more per household and Sarah Olney, the Liberal Democrat Treasury spokesperson, said in response to the IFS’ findings: “This is the same party which promised not to raise people’s taxes and is now taxing families through the nose.”
Ben Zaranko, a senior research economist at IFS, 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.”
The IFS report stated: “The government may decide to announce tax cuts in the run-up to the next election. But there is no world in which this parliament – or indeed the period since Rishi Sunak became Prime Minister – turns out to be anything other than a tax-raising one. In fact, it is currently on track to be the biggest tax-increasing parliament since comparable records began.”
It continued: “The UK government is currently raising more in tax revenue, as a percentage of national income, than at any time since the 1940s. This is, in no small part, due to a raft of tax-raising measures announced over the past few years. Notable examples include the big increase in the main rate of corporation tax from 19 per cent to 25 per cent, the energy profits levy, and freezes to various income tax and National Insurance thresholds.
“Economic developments mean that some of these measures will now raise considerably more than originally planned or intended. That is particularly true of freezes to income tax allowances (which would otherwise have risen in line with CPI inflation).”
Meanwhile, a spokesperson for the Treasury said that it was “needing to take the difficult decisions to restore public finances”, reported BirminghamLive, and went on: “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.”
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