The income tax revenue has risen by 70 percent since 2010, to £264 billion. This shows the dramatic increase in tax burden that successive Conservative governments have overseen since they came to power.
HM Revenue & Customs figures revealed that Rishi and Jeremy Hunt increased income tax receipts while not actually raising headline rates.
Sunak, as chancellor in the budget of March 2021, froze several tax bands over a number of years. This allowed workers to move up the tax scale during a time of record wage increases. Income tax receipts have risen by £49 billion or about a quarter since that policy was implemented and extended by Jeremy Hunt.
Income tax receipts have increased by £113 billion or 76 percent since 2010, when the Tories ousted Labour and entered No. 10 through a coalition with Liberal Democrats.
This rise is a result of a combination between the inflationary effect, the natural growth of the economy’s cash and the population increase. It also reflects the Conservatives fiscal policy.
Philip Shaw, Chief Economist at Investec said that the income tax collection has increased materially since 2009. It is important to place the figures in context. In cash terms, the GDP has increased by 64% over that same time period. 2009-10 was also just before the austerity era, which addressed public finances following the financial crisis.
As part of fiscal consolidation, the government allowed fiscal drag in order to claw back revenues.
Hunt and Sunak face pressure from Conservative MPs who want to reduce the tax burden. It is expected to reach its highest level since the Second World War, just before an autumn general election in 2024.
The chancellor announced last weekend that the 2p reduction in national insurance, which was announced in the Autumn Statement and kicked in this Month, was the “start of a new process”. However, he warned that he didn’t know if he would be able to afford additional tax cuts in the March 6th budget.
The next budget will likely be the last financial event before the January 2025 election. A drop in inflation to 3.9% and a lower expectation of interest rates on the market could give the chancellor between 15 billion and 25 billion pounds to spend.
The public finances are in a fragile condition due to increased debt interest costs. This is caused by the steep increase in borrowing costs in the wake of the pandemic, as central banks raised interest rates in an effort to control inflation. The prime minister, and the chancellor tried to rebalance public finances by increasing government revenues. They also frozen tax thresholds in order to push workers into higher tax brackets following a pay rise. This process is known as fiscal drag.
The VAT rate has nearly doubled to 15% under Geoffrey Howe’s tenure as chancellor of Margaret Thatcher.
HMRC has released separate figures showing that this year, 32 percent more workers will pay the 40 per cent income tax rate compared to five years ago.
The Treasury stated: “The average taxpayer will pay £1,000 lower in taxes next year as a result of our reductions to national insurance contributions, and increases above inflation to the starting thresholds that have been made since 2010.
The average employee saves £450 a yearly with the reductions in NICs.
According to the latest data of the Organisation for Economic Co-operation and Development, Germany, France and Italy have all higher tax burdens than Britain. Britain’s tax burden, which is comparable to Poland and slightly higher than the OECD median of 34%, is comparable with that of France.