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 generate 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 jobs 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.”

Valentin Boboc of the Institute of Economic Affairs (Image: -)

He added: “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.”

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.”

Labour Is Driving the UK to Ruin – The Latest Tax Figures Will Shock You

Britain’s tax burden is becoming one of the most explosive political issues facing the Labour government, with new figures revealing the enormous amount of money flowing into the Treasury and growing concerns about the pressure being placed on workers, families and businesses.

The latest figures from HM Revenue and Customs show that tax and National Insurance receipts reached £467.3 billion between April and September 2026. That is £29.5 billion more than during the same six-month period a year earlier.

The figures have intensified criticism of the government just as Chancellor John Healey faces mounting pressure over the Budget.

For millions of households already struggling with bills, mortgages, food prices and energy costs, the central question is becoming increasingly difficult to ignore: how much more can taxpayers be expected to pay?

The headline figures are striking. But the political argument goes much deeper than the amount of money collected by the Treasury.

A staggering increase in tax receipts

According to HMRC’s latest monthly bulletin, income tax, capital gains tax and National Insurance receipts accounted for £270.8 billion of the total collected between April and September.

That represents an increase of £17.8 billion compared with the same period last year.

VAT receipts also rose, reaching £90.5 billion, while business tax receipts climbed to £52.2 billion.

These figures demonstrate the scale of the money being collected across the economy. They also arrive at a particularly sensitive moment, with the government facing demands to demonstrate that higher revenues are translating into better public services and stronger economic performance.

It is important to distinguish rising tax receipts from a single new tax increase. Higher wages, prices, company profits and changes in tax policy can all increase the amount collected.

Nevertheless, the scale of the increase gives critics fresh ammunition as they argue that the tax burden is becoming increasingly difficult for ordinary people to bear.

For taxpayers, the question is not simply how much the government collects. It is whether households receive sufficient value in return for the money they contribute.

The hidden squeeze on working people

One of the most controversial features of Britain’s tax system is the continued freeze on important income tax thresholds.

When thresholds remain unchanged while wages increase, workers can find themselves paying more tax even if their income has not increased significantly in real terms.

This process is known as fiscal drag.

A worker may receive a pay rise intended to help cover higher living costs, only to discover that a larger portion of their earnings is subject to tax. Others can gradually move into a higher tax band without experiencing a substantial improvement in their purchasing power.

The consequences can be especially frustrating for people who have worked hard to secure promotions, develop professional skills or increase their household income.

The government can collect additional revenue through this mechanism without announcing an increase in the headline rate of income tax.

That is why critics frequently describe the effect as a stealth tax.

The controversy is not confined to wealthy individuals. Teachers, nurses, police officers and other public-sector employees can also face higher tax bills as their earnings rise against frozen thresholds.

Figures released by the Liberal Democrats on October 26, based on analysis commissioned from the House of Commons Library, estimated that 580,000 people would move into the higher-rate income tax band during the 2026–27 tax year because of the threshold freeze.

A further 600,000 lower earners were projected to begin paying basic-rate income tax for the first time.

These are estimates of the impact of frozen thresholds, rather than evidence that every affected worker has experienced the same increase in their tax bill. Even so, they highlight the growing political sensitivity surrounding the government’s approach.

Is Labour breaking its promises?

Labour entered government promising to protect working people from increases in the main rates of income tax, National Insurance and VAT.

However, critics argue that freezing thresholds while earnings rise undermines the spirit of that commitment.

The distinction between increasing a tax rate and collecting more tax through frozen thresholds may be technically important, but it does not necessarily make the financial impact feel any less real to a household.

A family facing higher rent, rising food prices and expensive energy bills is unlikely to be reassured simply because its headline income tax rate remains unchanged.

For many voters, the crucial issue is the amount of money left after tax and essential expenses have been paid.

The government must therefore explain how its tax decisions fit with its promises to improve living standards and support economic growth.

If workers feel that every pay rise is being swallowed by taxes and rising prices, political frustration could deepen.

Opposition parties are likely to make this issue central to their arguments, presenting the tax figures as evidence that the government is asking too much from people who are already under pressure.

However, the freeze on tax thresholds was originally introduced by the Conservatives and subsequently extended by Labour. Responsibility for its effects therefore spans decisions taken by successive governments.

That history complicates the political debate, but it does not remove the responsibility of the current government to explain what it intends to do next.

The growing cost of running the state

The debate also raises a larger question about the cost of government.

Britain must finance the NHS, pensions, schools, defence, policing, welfare payments, infrastructure and interest on its public debt.

These commitments require substantial and sustained revenue.

Supporters of higher taxation argue that public services cannot be maintained without sufficient funding, particularly when an ageing population increases pressure on healthcare and pension spending.

But critics counter that continually increasing the tax burden is not a sustainable substitute for improving productivity, controlling waste and ensuring public money is spent effectively.

The Institute of Economic Affairs has recently highlighted concerns about the relationship between the cost of the state and the number of workers generating enough tax revenue to cover that cost.

Its analysis estimated that government spending amounted to approximately £19,574 per person and argued that workers would need to earn £42,375 before generating enough tax to cover the average cost of the state.

These figures depend on how government spending and tax contributions are allocated, and they should not be interpreted as a literal bill issued to every individual.

Nevertheless, they illustrate a fundamental challenge: public spending must ultimately be financed through taxation, borrowing or other government income.

If spending commitments grow faster than the economy’s capacity to generate wealth, policymakers face increasingly difficult choices.

Those choices include raising taxes, reducing spending, borrowing more or finding ways to increase economic growth.

None offers an effortless solution.

Businesses fear the consequences

The pressure is not limited to individual taxpayers.

Businesses also face concerns about taxation, employment costs, investment decisions and the wider economic outlook.

When companies believe that operating costs are rising too quickly, they may delay expansion, reduce recruitment or pass some additional expenses on to consumers.

Smaller businesses can be particularly vulnerable because they often have less financial flexibility than large corporations.

Employers need confidence that investing in Britain will generate a reasonable return. If they believe that higher taxes and regulatory uncertainty will make expansion less attractive, they may reconsider where to invest.

That could weaken productivity and limit the creation of well-paid jobs.

At the same time, businesses rely on public infrastructure, an educated workforce, reliable transport and functioning public services. Taxation helps finance many of the conditions that allow the private sector to operate.

The challenge for the government is therefore to strike a balance between raising the revenue required for public services and maintaining an environment in which companies can grow.

Critics argue that Labour risks getting that balance wrong if it relies too heavily on additional taxation rather than economic reform.

The government, meanwhile, must demonstrate that its decisions can support investment and improve living standards rather than simply increase the amount collected by the Treasury.

All eyes turn to the Budget

The latest figures have arrived as the government prepares for a crucial Budget announcement.

Healey is under pressure to maintain fiscal stability while responding to rising costs, economic uncertainty and demands for assistance from households.

Reports ahead of the Budget have pointed to possible tax measures affecting banks, gambling companies and online marketplaces. The government has also faced calls to provide targeted support for households struggling with energy costs.

The details matter because the final effect will depend on which measures are adopted, who pays for them and how the money is used.

A tax aimed at a particular industry may have consequences beyond the companies directly affected. Depending on market conditions, some costs can be passed on to customers, workers or suppliers.

Equally, targeted tax relief may help particular households without resolving the wider problem of rising living costs.

The government will need to explain not only how it intends to raise revenue, but also how its decisions will support economic growth and protect those least able to absorb additional costs.

With public finances under pressure, the Chancellor has limited room to make promises without explaining how they will be funded.

Can Britain escape the high-tax cycle?

The argument over taxation ultimately reflects a wider disagreement about Britain’s economic future.

One side argues that properly funded public services are essential to a functioning economy and that a wealthy country must raise enough revenue to meet its responsibilities.

The other warns that higher taxes can discourage work, investment and enterprise, particularly when households already face expensive housing, transport and energy.

Both arguments raise legitimate questions about how Britain should balance public spending with private prosperity.

The danger is that the debate becomes focused entirely on how much money can be collected, rather than how effectively the economy can generate wealth and how efficiently public money is spent.

Sustainable growth could help increase government revenue without relying exclusively on higher tax rates. Better productivity, stronger investment and improved employment opportunities could also help households enjoy rising real incomes.

But achieving those outcomes requires more than political promises. It demands credible economic policies, effective public services and a stable environment in which businesses can plan for the future.

For Labour, the latest tax figures present a serious political challenge. The government must show that rising receipts are part of a strategy capable of improving the country, rather than simply placing a heavier burden on taxpayers.

For the opposition, the figures offer an opportunity to argue that Britain’s economic direction needs to change.

And for ordinary people, the question remains painfully straightforward: if the government is collecting billions more in tax, will families actually feel better off?

Until ministers can provide a convincing answer, the argument over taxation is likely to remain at the centre of Britain’s political debate.

The numbers are substantial, the choices are difficult, and the consequences will reach far beyond Westminster. The real test will be whether the government can turn record levels of revenue into stronger living standards, better services and an economy that gives working people a genuine reason to feel optimistic about the future.