The share of jobs generating enough tax to match state spending per head has plummeted
Andy Burnham’s arrival in power coincides with grave concerns about the economy (Image: Paul Marriott/Shutterstock)
The British state now spends the equivalent of £19,574 per person, but fewer than one in four jobs generates enough tax to foot the bill. A new analysis by the Institute of Economic Affairs (IEA) sounds the alarm about the condition of the public finances and warns the Chancellor against heaping an even greater burden on taxpayers in this week’s Budget. The IEA found workers “need to earn £42,375 before they generate enough tax to cover the average cost of the state”. It reports that fewer than seven million of Britain’s nearly 29 million positions generate enough tax to cover Government spending per person. It warns that while 40.5% of jobs cleared this threshold in 1998-99, this is true for just 24.2% today. The calculation “includes the full cost of government, from the NHS, pensions and welfare to defence and debt interest”.
Valentin Boboc, the think tank’s chief economist, said: “Ahead of the Budget, the Government needs to recognise that Britain cannot keep piling higher taxes onto a shrinking tax base. The Chancellor should get spending under control and remove barriers to work, investment and growth. The least productive decision right now would be to create a heavier burden on those already footing the bill.” Richard Fuller, the Shadow Chief Secretary to the Treasury, warned: “Britain is being carried on the backs of a shrinking band of hard-working taxpayers, and Labour’s only plan for the Budget is to load even more onto them. Every Labour tax rise lands on the same middle earners and small business owners who pay for everyone else, while the welfare bill keeps climbing.”
Valentin Boboc of the Institute of Economic Affairs (Image: -)
John O’Connell, chief executive of the TaxPayers’ Alliance, added: “These staggering figures prove that Britain’s bloated state has become completely unsustainable. With spending hitting £19,574 per person, squeezing an ever-shrinking pool of high earners to cover the bill will only stifle economic growth. Instead of hiking taxes in the budget, the chancellor must rein in the ballooning benefits bill.”
A Treasury spokesperson said: “We know families are feeling the pressure from higher prices and mortgage costs, driven in part by conflicts overseas. That’s why we are giving people breathing space by removing VAT from electricity bills, extending the 5p fuel duty cut, and maintaining one of the highest personal allowances in the G7. At the same time, we are maintaining economic stability by meeting our fiscal rules with a buffer against uncertainty, which is the best way to keep mortgage rates down, and the IMF expects Britain to reduce its deficit faster than any other G7 economy.”