Taxes will rise by £150 billion over the next five years. That's what the Treasury forecast in yesterday's Pre-Budget report.
Table B15 of the report shows that the government foresees net taxes and national insurance contributions rising from 37.4% of GDP this year to 38.6% in 2010-11; only 0.1 percentage point of that is due to higher North Sea revenues. With GDP forecast to rise from £1225bn this year to £1577bn in 2010-11 (table B3), this implies a rise in taxes from £458bn to £608.7bn. That's £150.7bn.
This is equivalent to twice this year's VAT receipts, or to this year's income tax and duties on tobacco and alcohol combined (table B14).
Granted, most of this rise represents the effect of growth; the Treasury reckons on getting 42.8% of the £352bn rise in GDP it foresees.
However, the rise in the share of taxes in GDP is equivalent to a £14.7bn tax rise - equivalent to 4p on the basic rate of income tax.
Did you read this in the dead trees?
Fiscal drag?
Posted by: Meaders | December 06, 2005 at 05:17 PM
That's a lot of the story, Meaders - but not all. Isn't it a bit odd that taxes are forecast to take 42.8% of growth, when the top marginal tax rate is 40%?
Part of the story is that pay rises for lower earners will be clawed back by falling tax credits - very egalitarian.
Posted by: chris | December 07, 2005 at 10:27 AM
Including national insurance contributions the highest marginal rate of income tax is 50% but there will be consumption tax on top of that.
Posted by: Illyrian | December 07, 2005 at 11:17 AM
Interesting information
Posted by: Barry Ojar | December 10, 2005 at 06:23 PM
Interesting information
Posted by: Barry Ojar | December 10, 2005 at 06:23 PM