Politics

Rishi Sunak is overseeing biggest tax rises since Second World War, IFS think tank finds

Tax revenue will amount to 37% of national income by the next election, up from about 33% four years ago, analysis from the Institute for Fiscal Studies suggests

Rishi Sunak has presided over tax hikes. Image: Simon Walker/ No 10 Downing Street

The current Tory-led parliament will oversee the biggest set of tax increases since the Second World War, the country’s leading economic think tank has said.

Tax revenue will amount to 37% of national income by the next election, analysis from the Institute for Fiscal Studies suggests, up from about 33% four years ago.

This is the largest increase since records began in the 1950s. The spike amounts to about £3,500 more per household, though it will not be spread equally.

The pandemic is not the main factor behind tax increases, said Ben Zaranko, a senior research economist at the IFS, blaming high spending and pressures on the NHS instead.

“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.

Key measures contributing to the high tax burden include hiking corporation tax from 19% to 25%, introducing the energy profits levy, and freezing several income tax and national insurance thresholds.

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The report will be a headache for Rishi Sunak, who is under pressure from rightwing MPs to cut taxes ahead of the next election. His predecessor Liz Truss promised to slash taxes and reduce radical free-market economic policies, tanking the pound in the process.

But just last week, chancellor Jeremy Hunt told LBC it would be “virtually impossible” to reduce taxes right now due to high inflation.

A Treasury spokesperson said that the tax burden remained lower than any major European economy.

“Driving down inflation is the most effective tax cut we can deliver right now,” they said.

Labour accused the government of “clobbering” the public with new taxes.

“Successive Tory governments have overseen 13 years of low growth and stagnant wages,” shadow chief secretary to the Treasury Darren Jones said.

“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.”

Zaranko said that a high-tax model is likely here to stay, regardless of who wins the next election.

“It is likely that this parliament will mark a decisive and permanent shift to a higher-tax economy,” he said.

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Could a wealth tax reduce taxes for everyone else?

Britain’s tax system entrenches inequality by taxing the very richest at the expense of the poorest. The government could tax cuts on income by raising taxes on wealth.

In a separate report out today, a report from the Resolution Foundation think tank said that increases to wealth taxes on the UK’s richest were a “no-brainer”.

Between 2006 and 2020, total wealth for the richest 10% of people grew 25 times faster than for the poorest 30%, the analysis found.

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