The UK’s tax burden will soon rise to its highest level for over 30 years, which will extend the period of austerity until the mid-2020s, according to the Institute for Fiscal Studies (IFS).
The think tank estimates that, despite cuts in public spending, there will need to be an additional £34bn in tax rises or spending cuts in the next Parliament if the UK’s budget deficit is to be closed.
In its annual “Green Budget”, published ahead of Chancellor Philip Hammond’s Budget next month, the IFS claims that on current plans and adjusted for expected inflation, public spending will be 13 per cent lower on 2010-11 levels by 2019-20.
Last year the Chancellor said he was ignoring his predecessor’s target for cutting the deficit but said he would aim to close it in the next Parliament, which is due to end in 2025. However, the IFS said that the target could not be met in the timeframe.
Therefore, the organisation claims that, despite the Government’s pledge not to increase income tax, national insurance or VAT, tax, as a share of national income, was still due to rise to 37 per cent by the end of the decade, its highest ratio since 1986-87.
According to the IFS, there are £17bn of tax rises planned over this Parliament, including so-called ‘stealth measures’, such as the apprenticeship levy and higher insurance taxes.
They claim that these will more than offset the tax cuts that have been announced, which include raising the income tax personal allowance and higher rate threshold, freezing fuel duties, cutting corporation tax and introducing a new main home allowance for inheritance tax.
