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

Published

1 year ago

September 29, 2023

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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.

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.”

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.”

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.”

Politics

Starmer says ‘US is right’ about UK and Europe needing to take more responsibility for defence

Published

8 hours ago

February 23, 2025

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Starmer says 'US is right' about UK and Europe needing to take more responsibility for defence

Sir Keir Starmer has said the United States “is right” about the UK and Europe needing to take more responsibility for defence and security.

The prime minister, speaking at the Scottish Labour conference in Glasgow on Sunday, said he is clear Britain “will take a leading responsibility” in protecting the continent.

“Instability in Europe always washes up on our shores,” he said.

“And this is a generational moment. I’ve been saying for some time that we Europeans – including the United Kingdom – have to do more for our defence and security. The US is right about that.”

He added “we can’t cling to the comforts of the past” as it is “time to take responsibility for our security”.

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Donald Trump sparked an emergency meeting of European leaders this week after he said European NATO members should spend more on defence, while the US should spend less.

Sir Keir has said he will set out a path for the UK to spend 2.5% of GDP on defence, up from the current 2.3%, but has not indicated when that will be.

It is believed he may announce the details when he visits Mr Trump in Washington DC on Thursday, bringing forward the announcement that was expected in the spring when a defence spending review is published.

The prime minister reiterated the UK will “play our role” if required in Ukraine following a peace agreement after he earlier this week said the UK would send troops to be part of a peacekeeping force.

However, his comments caused a row with Germany and Italy who said it was premature to commit to boots on the ground, although France agreed with the UK.

Sir Keir said: “As we enter a new phase in this conflict, we must now deepen our solidarity even further.”

He added: “There can be no discussion about Ukraine without Ukraine.

“And the people of Ukraine must have long-term security.”

This week has seen US officials meet their Russian counterparts in Saudi Arabia to discuss Ukraine – which has been met with indignation by Ukrainian President Volodymyr Zelenskyy as none of his team were invited.

No Europeans were invited either, sparking concern the US is pandering to Vladimir Putin.

Sir Keir has promised Mr Zelenskyy he will make the case for safeguarding Ukraine’s sovereignty when he meets with Mr Trump, who has called the Ukrainian president a dictator.

Mr Trump also said Sir Keir and French President Emmanuel Macron, who will visit the White House too this week, “haven’t done anything” to end the war.

Politics

Starmer announces £200m for Grangemouth

Published

11 hours ago

February 23, 2025

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The prime minister has announced £200m for Grangemouth ahead of the closure of Scotland’s last oil refinery.

Sir Keir Starmer, speaking at the Scottish Labour conference on Sunday, said the cash would come from the National Wealth Fund for an “investment in Scotland’s industrial future”.

Grangemouth oil refinery, on the banks of the Firth of Forth, is set to cease operation this summer and transition into an import terminal, making 400 workers redundant.

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Sir Keir said: “We will grasp the opportunities at Grangemouth, work alongside partners to develop viable proposals, team up with business to get new industries off the ground and to attract private investors into the partnership we need.

“We will allocate £200m from the National Wealth Fund for investment in Grangemouth.”

The money comes on top of a £100m “growth plan” already in place for the area.

Scotland’s first minister, the SNP’s John Swinney, welcomed the announcement and said it is “important that the Scottish and UK governments work together on securing the future for the workforce”.

Sir Keir said the new investment will be a partnership with the private sector, and he is expecting three times the amount the government is putting in to come from private investors.

The prime minister said he believes the transition to clean energy is a “golden opportunity for Britain, especially for Scotland”, and is essential for national security as it “gets Putin’s boots off our throat”.

However, he said oil and gas are also “vital for our security” so will be “part of the future of Scotland for decades to come”.

As well as the investment in Grangemouth’s future, Sir Keir said every person made redundant will get 18 months full pay and a skills and training offer “backed up with up to £10m”.

Any business in Grangemouth that takes on those workers will get National Insurance relief, he also said.

Petroineos, which owns Grangemouth, announced last September it was to close Grangemouth by this summer because it was unable to compete with sites in Asia, Africa and the Middle East.

The refinery is understood to have been losing about £395,000 a day when it made the announcement and was on course to lose about £153m this year.

The company said the decision would “safeguard fuel supply for Scotland” by converting the site into a terminal able to import petrol, diesel, aviation fuel and kerosene into Scotland.

However, it said that would only need a workforce of fewer than 100 employees.

Petroineos announced its intention to close the plant in November 2023 but union leaders had hoped it could remain open for longer to provide time for a green alternative to be established there.