Taxpayers have suffered austerity while spending rises
Feb 2013 01

George Osborne made much of the importance of controlling the deficit in the run up to the 2010 general election. There were two key aspects of his approach. He would eliminate “the bulk” of the deficit by the end of this Parliament in 2015 and this reduction would be accounted for primarily by spending cuts rather than tax rises. The mix would be a ratio of 80:20.

By changing the deficit target in the 2011 Autumn Statement, the Chancellor effectively gave up the first of his two planks of his deficit policy, eliminating the bulk of it by 2015. But what about the 80:20 ratio?

The Chancellor understood that excessive government spending kills growth along with the taxes required to pay for it. He knew that above a certain level, debt and borrowing hold back growth. But two and a half years in to the new government, the fiscal consolidation has been disappointingly weak on spending cuts. And instead of cutting the overall growth of current spending, the cuts have come from capital spending. As James Forsyth recently has remarked, George Osborne is becoming the St Augustine Chancellor. Lord, give me austerity but not yet.

Much more of the fiscal tightening has been undertaken by tapping up taxpayers for more. The Treasury are engaged in a concerted large-scale campaign of adjustments to tax rates, thresholds and reliefs right across the tax system aimed at quietly emptying taxpayers’ pockets. Figures we released on Tuesday revealed that the total number of these rises already implemented is 254 with another 45 already planned for before the election, an astonishing 299 in total. In contrast, the number of tax cuts is just 119, leaving a difference of 180.

The changes are yielding results for HMRC, but not without cost. Receipts are projected to rise from £513 billion in 2009-10 to a projected £671 billion in 2015-16. Even after adjusting for inflation that’s an increase of 15 per cent. The continuing economic stagnation with growth figures yo-yoing around zero are the costs of stubbornly high spending on things that don’t create growth and increasing taxes on the things that do. This ‘front loading’ of tax austerity now with spending austerity later is reflected in the number of tax-raising measures.

taxr rises graph

The graph above illustrates that the majority of the Government’s plans for tax rises have already been implemented, at least according to the assurances of Treasury ministers. From National Insurance to VAT, from headline rate rises to tightening various rules and reliefs, the majority of the Government’s planned tax increases have already been implemented while the bulk of the planned spending cuts have yet to begin.
George Osborne told the Daily Telegraph in 2011,

I’m a Conservative who believes in lower taxes. They lead to a more enterprising economy.

Lower taxes don’t look likely anytime soon. He has another 45 tax hikes planned for before the next election but just 10 cuts. The more enterprising economy will have to wait.

Rory is the Research Director of the TaxPayers’ Alliance. Rory’s work is focused on tax policy and economics, with a particular emphasis on tax simplification.



  • http://www.facebook.com/biffabeaumont Mark Beaumont

    UKIP UKIP UKIP at lease they plan to put some of your proposals in place.

  • http://www.facebook.com/profile.php?id=1171637859 Matthew Brooker

    I had to read that in small sections due to it incurring too much red mist! Good, concise article. So I guess the question then is how much taxation are Brits prepared to put up with, whilst at the same time experiencing yet another round of sterling depreciation? Last one to leave, please turn the lights off or someone give voters a genuine choice at the ballot box!

  • blarg1987

    Be interesting to know how much of the deficiet increase is down to outsourcing services whereby the state sector was told to cut costs after it asked for more money, was oputsourced and then the private company asked for more money and got a blank cheque, this has happened trouble is we can not do FOI’s as these are classed as “commercially sensitive” issues.