Labour has raised taxes to a near post-war high – its language on raising living standards is just rhetoric
Daily Telegraph 04/03/26
Listening to the Chancellor’s Spring Statement in isolation would give the impression that the Government is running an efficient economy with a realistic promise of improving living standards.
Unfortunately, I don’t think that this was likely to be the case for most of us, even before we had the uncertainty imposed on us by international events.
Improved living standards rely principally on the ability of the Government to do so through economic growth. This in turn relies on greater business investment and improved productivity.
On taking office, Rachel Reeves declared that economic growth was to be her priority, but it has not worked out that way.
A combination of the increase in employers’ National Insurance, business rates, and changes to the minimum wage has placed a heavy burden on business and reduced their incentive to take on additional employees.
This is particularly tough on the young people who the Government say they want to help. The hospitality sector in particular has suffered with pubs and restaurants in very difficult circumstances and unable to afford to employ the young people who traditionally have often started their working life in this sector.
For those in work, or pensioners with private income from pensions they have saved up for, the ongoing freeze in personal allowances is having a major impact on the tax that are paying.
The incentive to save is about to be hit again, with an additional two percentage point tax on savings and dividend income. Those who have diligently saved in private pension funds are about to have the rug pulled away when these funds are brought into the inheritance tax net.
The evidence for the impact of the problems facing us can be found in the report from the Office for Budget Responsibility (OBR) released with the Spring Statement.
The OBR says that public sector receipts are expected to rise from 38.8pc of GDP in 2024-25 (£1.1 trillion) to an expected 42.7pc of GDP (£1.6 trillion) in 2030-31.
Taxes raised as a share of GDP are forecast to increase from 34.5pc of GDP in 2024-25 to a peak of 38.5pc of GDP over this period. The peak in 2030-31 would represent a historic high and a 5.6pc of GDP increase on the pre-pandemic level.
That level of additional tax represents a massive burden on both individuals and business and is wholly incompatible with the declared growth agenda.
At a personal level, the OBR expects a large increase on the amount raised by capital gains tax (CGT) and inheritance tax (IHT) as a direct consequence of decisions made by the Chancellor in her two Budgets.
Receipts from IHT are expected to rise from £8.3bn in 2024-25 to £14.7bn in 2030-31, an increase of 77pc.
CGT receipts are expected to rise from £13.7bn in 2024-25 to £34.9bn in 2030-31 over the same period, a staggering increase of over 150pc. These capital taxes are now planned to take 2.3pc of GDP, up from 1.4pc in 2024-25.
Stamp duty on property is another significant burden on those, particularly families, hoping to improve their lot. Once again, the OBR numbers demonstrate the insidious impact of stealth taxes.
Receipts from stamp duty are forecast to rise from £15.2bn in 2024-25 to £28.1bn in 2030-31, an increase of almost 85pc.
Finally, there is council tax, which the OBR says will increase from £47.4bn to £67.6bn over the same period, an increase of over 42pc.
The Chancellor, repeatedly, says that she is helping “working people”. It is difficult to see how she is doing this while raising tax so dramatically.
Once again, the Chancellor could not resist having a dig at Liz Truss. Although this was undoubtedly a difficult time for the country, Truss understood that improved living standards come from economic growth with entrepreneurs and other employers encouraged to invest and take on additional staff by business-friendly policies, including lower taxes on both companies and their customers.
I would very much like to feel optimistic but believe the Chancellor is displaying undue complacency in the face of considerable challenges ahead.
I fear that we are set on a path of ever higher taxation and public expenditure, accompanied as a consequence by anaemic growth and stagnant living standards.
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