The Office for Budget Responsibility (OBR) has warned that the UK is on track to reach the highest level of tax burden since World War Two and it expected to hit a post-war high of 37.7% of GDP in 2027 and 2078.
Helen Miller, head of tax and deputy director at the Institute for Fiscal Studies (IFS) said, “While this was not a tax rising budget, previous policies mean that tax revenues continue to rise to their highest ever level.
“This is charting new ground for the UK, but is not unusual internationally.”
The OBR’s document, released which coincided with Wednesday’s Spring Budget, said, “The tax burden now rises to 37.7% of GDP (gross domestic product, or the total value of the economy) in 2027-28, which would be a post-war high and is 4.7 percentage points above where it stood before the pandemic (in 2019/20).”
The OBR said that the current freezes with ongoing income tax thresholds generates what is called a fiscal drag, this is when earnings rise therefore resulting in people paying more tax.
The OBR said that the UK tax burden has remained below average over other advance economies, but it is high in the UK.
Following the Second World War in the mid-60s Britain’s tax burden remained high which was due in some part to finance larger stock of debt from war in the UK.
The OBR added between the 1980s and the 1990s due to a fall in taxes on income and profits along with plummeting oil and gas revenues the UK tax burden went in a downward spiral.