Is the tax burden at a 70 year high?

Taxes under the Tories now are at a 70 year high and under their plans they’re due to go up in each of the next five years taking the tax burden for the average family in Essex and elsewhere up by £870.

During an interview on BBC Radio Essex [1:30:00] on 17 May shadow chancellor Rachel Reeves MP claimed that taxes under the Conservative government “are at a 70 year high” and are “due to go up in each of the next five years”.

It’s true that in the 2022/23 financial year the tax burden—which refers to tax revenues as a percentage of gross domestic product (GDP)—was at the highest level in over 70 years. In the last financial year it fell slightly, but is forecast to increase over each of the next five years to a near-record level.

At 36.3%, the tax burden in 2022/23 was the highest since 1949 (when it was 36.9%) and the second highest since records began in 1948, when the tax burden was 37.2%.

However, in 2023/24 it fell slightly to 36.1%.

The Office for Budget Responsibility (OBR), on whose figures Labour have based similar claims previously, forecasts that the tax burden will increase over each of the next five years, reaching 37.1% in 2028/29. This would be the second highest level on record, behind only 1948.

Will families’ tax burdens go up by £870?

Ms Reeves claimed that as a result of the government’s tax plans the tax burden for the “average family” would go up by £870.

The figure is based on Labour analysis circulated in March looking at the net impact of personal tax changes announced by the government during this parliament, as well as changes to council tax (which increased the amount by which councils can increase council tax without holding a referendum).

The OBR says that net impact of personal tax threshold freezes and National Insurance contributions reductions is forecast to increase tax receipts by £19.7 billion by 2028/29, while changes to council tax are forecast to raise £4.9 billion by 2028/29.

Labour combined these two figures for a total of £24.6 billion, which it then divided by the estimated 28.2 million households in the UK in 2022 for an average of £872 per household (note that the estimated number of households has since increased to 28.4 million in 2023, which would give an average of £866).

Given Ms Reeves spoke of the burden for the “average family” it’s worth noting that there are fewer families in the UK (19.4 million in 2022, 19.5 million in 2023) than households. In this case, a family is defined as “a married, civil-partnered or cohabiting couple with or without children, or a lone parent with at least one child, who lives at the same address; children may be dependent or non-dependent”. The average tax burden per family would be slightly higher (around £1,268 using the 2022 estimated number of families, and £1,262 using the 2023 estimate).

The Institute for Fiscal Studies (IFS) said this analysis “isn’t unreasonable”, but has highlighted that Labour’s calculation does not factor in recently announced changes to child benefits and non-dom status, “even though both of those are actually income tax changes”, as well as ongoing fuel duty reductions. The IFS added that it’s “debatable” whether council tax changes should be included, given the government itself does not impose specific council tax increases.

Image courtesy of UK Parliament