Ignore BBC spin, Tories are making the UK a high-tax economy

Rarely has the leading item of a BBC Radio News bulletin been more misleading.

The newsreader said 70% of workers will get an effective tax cut after Rishi Sunak raised the threshold for paying National Insurance. What a nice man. She failed to mention that he opted not to raise tax thresholds in line with inflation for the next four years – an effective tax rise that will more than cancel out any largesse on National Insurance. Which by the way, is still rising for everyone else.

Rishi giveth and Rishi taketh away.

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The next headline was the Chancellor’s widely anticipated five pence cut to fuel duty which will make no real difference to the average commuter with a stark choice between the highest petrol price for a generation and the highest rail fares in Europe, up to SEVEN TIMES more than similar journeys in Europe.

The news item concluded with Sunak’s pledge to cut the basic rate of income tax by a penny before the end of this parliament. How is that even possible, when there isn’t the cash (or the will) to raise benefits in line with inflation right now? Ah, but right-wing ideologues like Jacob Rees-Mogg were cheering from their chaise longues.

And if you switched off right there in a mixture of boredom, depression and disgust, you would have missed something massively important that plainly contradicts the government’s message of sunny uplands and unbounded generosity.

The Office for Budget Responsibility says inflation at 6.2% and higher taxes from next month will produce the biggest fall in real disposable household income since records began in 1956.

Read that again. The average taxpayer is facing Armageddon because of inflation and HIGHER taxes. Not lower – despite all of yesterday’s hoo-ha. Welcome to Rishi Sunak’s High Tax Britain.

Of course, that’s not the version of Blighty the “prudent” Chancellor wants to cultivate. But it’s true.

In the last few years, Messrs Sunak and Johnson have pushed through as many stealth tax rises as Gordon Brown and Tony Blair.

The big difference – none of the cash raised by the Tory tag-team will be redistributed to tackle inequality or level up.

Those stealth tax rises include:

• - Corporation tax increase announced in the 2020 Budget.
• - Council tax measures announced in the 2020 spending round.
• - Reduction in entrepreneurs’ relief for Capital Gains Tax.
• - Corporation tax increase in Budget 2021.
• - The income tax personal allowance freeze in Budget 2021.
• - Inheritance tax threshold freeze in Budget 2021.
• - VAT registration threshold for business freeze in Budget 2021.
• - Health and social care levy in autumn Budget 2021.
• - Dividend tax in autumn Budget 2021.
• - Freeze in starting rate band for savings tax in autumn Budget 2021.
• - Freeze in adult ISA subscription limit in autumn Budget 2021.
• - Income tax basis period reform in autumn Budget 2021.
• - Council tax measures in autumn Budget 2021.
• - Freeze in student loan repayment threshold announced in January 2022.

I know – the list makes your heid birl if you’re not an accountant.

And some tax rises affect only the fairly wealthy.

But together they mean Tory Britain is becoming one of the OECD’s high tax economies – with some of the lowest quality public services and the worst paid workers on the most precarious terms of employment (witness the casual dismissal of even union-organised staff at P&O).

That's a really raw deal. And it flies in the face of the usual Tory narrative. We imagine that low wage Britain – with dodgy public services delivered by giant poverty-wage paying private companies – is explained by the fact Tories are a low tax party.

But they aren’t.

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Don’t believe me. The Office for Budget Responsibility forecasts the ratio of tax to GDP in 2026/27 will be 36.2%. That’s the highest rate since the post-war Labour government of Ramsay MacDonald – minus the revolutionary upswing in public services offered to citizens in exchange.

For comparison the ratio was 32% under Theresa May’s government.

And for international context it was 39% in Norway, 44% in Sweden and 45% in Denmark in 2019.

OK – we’re nowhere near the Danes. Yet.

But the Nordic Model, with its high wage, high prices, high tax societies, has always been dismissed by Tory naysayers as an impossible dream or a “socialist nightmare”. Yet by 2026, Britain could be giving “high tax” Norway a run for its money – on the tax front at least – though sadly not on the high wages and world-beating public services that make Scandinavians willing to pay the world’s highest rates of personal taxation.

Now this revelation about High Tax Britain matters.

For one thing, it exposes the hypocrisy of Scottish Tory leader Douglas Ross (below) who misses no opportunity to complain about the modest Scottish Income Tax, turning Scots into the most highly taxed folk in Britain.

Yet his own party has turned EVERY British citizen into a high tax payer – with precious little to show in return except the worst funded health service in Europe, the second lowest state pension and (I suppose) furlough payments during lockdown. Except that furlough was also provided by European neighbours who (whisper it) are managing not to raise taxes a la Rishi.

The Labour Party has done some digging (let’s be fair) and found that Germany plans genuine tax cuts totalling 0.5% of GDP in 2022, Italy 0.2% and France 0.1 %. Among other G7 members, Canada and Japan have announced no personal tax rate increases.

Yet here, forgive the repetition, the Office for Budget Responsibility says inflation and higher taxes will soon produce the biggest fall in real disposable household income since records began.

Right-wing commentators have confirmed this drift towards a high tax Tory economy in some angry articles.

Writing in the Spectator, Annabel Denham, from the Institute of Economic Affairs observes: “When Sunak was confronted with a graph showing how much taxes had been raised during his tenure, he blamed the pandemic. Using crises to shirk responsibility has become the Johnson government’s MO. The war in Ukraine has been blamed for soaring energy costs – even though the trend was well underway before Putin’s tanks crossed the border.

“Gordon Brown (below) dramatically increased the role of government in economic life, but the Tories – with their 12 years in power – have done nothing to reverse it. Instead, they have resigned themselves to governing in a New Labour world.”

Jings, as if.

New Labour had many faults, but presiding over the biggest fall in real disposable household income since records began – not one of theirs.

So the average voter is approaching Nordic levels of personal taxation with east European (sorry) standards of public service and social protection in return. We should be beeling.

Rishi Sunak presents himself as a prudent low-tax Thatcherite – but he’s not. And even though commentators will sagely repeat this myth – he shouldn’t get away with it.

Nor should a party that’s taxing citizens till the pips squeak, behind a clever façade of token tax cuts which have already proved too eye-catching for broadcasters to ignore.

That’s their problem.

Don’t fall for it.