Experts are warning that households in the UK could face the largest tax rises since World War II, with an estimated impact of £3,500 per household. The Institute for Fiscal Studies (IFS) predicts that taxes will rise to around 37% of national income by the next general election, marking the biggest increase in taxes since comparable records began in the 1950s.
The rise in taxes is not solely due to the COVID-19 pandemic, but rather a result of decisions to increase government spending. Factors such as demographic change, pressures on the health service, and the unwinding of austerity measures have contributed to the need for higher taxes.
Tory MPs have been vocal about their dissatisfaction with the government’s refusal to consider tax cuts. However, Chancellor Rishi Sunak and Health Secretary Jeremy Hunt have emphasized the importance of fiscal responsibility amidst inflation concerns.
Ben Zaranko, a senior research economist at the IFS, believes that regardless of which party wins the next general election, a high-tax approach is likely to remain in place. He states that this Parliament is set to become the largest tax-raising one since World War II, and it signifies a permanent shift to a higher-tax economy.
Mark Franks, the director of welfare at the Nuffield Foundation, agrees that future governments will face strong pressure to further raise taxes in order to meet the growing demand for public services, particularly in healthcare. He emphasizes the need for transparent and credible strategies when making difficult trade-offs.
Opposition parties, such as Labour and the Liberal Democrats, have criticized the Conservative government for burdening the public with tax hikes while failing to address issues like low growth, stagnant wages, and crumbling public services.
In response, a Treasury spokesperson defended the government’s actions, stating that despite the need to restore public finances due to the effects of the pandemic and geopolitical events such as Russia’s invasion of Ukraine, the tax burden in the UK remains lower than other major European economies. The spokesperson also highlighted efforts to reduce inflation and personal tax thresholds.
Overall, the prospect of significant tax increases in the coming years has raised concerns among experts and opposition parties. The issue of balancing economic recovery with the burden on households is likely to remain a key topic of debate leading up to the next general election.
