Taxes are being cut.
While National Insurance contributions have been reduced, the nation’s so-called ‘tax burden’ is high, and is forecast to rise to record levels. The effective personal tax rate is at its lowest since 1975, but this doesn’t include all the taxes people pay.
Mortgage rates are coming down.
Two and five-year fixed rates did fall in the latter half of 2023, but have been rising recently.
In their first party political broadcast of the 2024 general election, the Conservative Party claimed that, under their leadership, taxes are being cut and mortgage rates are coming down.
But neither of these statements gives the full picture.
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Towards the start of the broadcast, the narrator claims “taxes are being cut”.
While it’s true that the government has reduced National Insurance contributions, the so-called ‘tax burden’—that’s tax revenues as a percentage of gross domestic product (GDP)—was at its highest level in more than 70 years in 2022/23.
In the last financial year it fell slightly, but the Office for Budget Responsibility (OBR) says it is then expected to increase every year over each of the next five years. In 2028/29 it is forecast to reach 37.1% of GDP, which would be the highest level since 1948 when records began.
But while this figure is predicted to reach historic levels under current forecasts, as we have written before, the effective personal tax rate for the “average earner” or “typical employee” is currently the lowest since 1975.
The Resolution Foundation forecasts that over the next few years the effective personal tax rate for the average earner will increase slightly from the current rate, but will remain low by historical standards.
It’s worth noting that these forecasts on the effective personal tax rates look at income tax and National Insurance contributions.
They don’t include some other taxes such as council tax, the high income child benefit charge, VAT or fuel duty. They also don’t include taxes that aren’t levied on individuals, such as corporation tax.
Overall, because of ongoing freezes to the thresholds at which NI and income tax are paid, the Institute for Fiscal Studies (IFS) says that once the impact of all tax changes is taken into account, the average worker will be about £340 better off in 2024/25 compared with 2021, but those earning below £26,000 will be worse off.
Later, the narrator also says “mortgage rates are coming down”.
Claims about rising or falling trends are often ambiguous, because they can depend on how far back you choose to look, and the broadcast didn’t give a specific time frame.
In this case, while mortgage rates did fall in the latter half of 2023, they have been rising again more recently, partly because of an increase in the cost of borrowing for lenders.
Recent figures show that two-year and five-year fixed-rate mortgage rates both rose in May, although they remained slightly lower than they were in January.
You can follow more of our politics coverage during the general election campaign trail on our dedicated live blog.
Full Fact has contacted the Conservative Party for comment, and will update this article if we receive a response.
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Image courtesy of Number 10 |
Correction 10 June 2024
We corrected a mistake in this article, which previously said that the government had reduced the basic rate of income tax. In fact the government announced a plan to do this in 2022, but later reversed the decision.
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