Why the cost of living is so high



Government intervention making people poorer 

High taxes, regulation and government intervention are making us all poorer. That is the damning conclusion of a new report released by the TaxPayers’ Alliance on the cost of living in Britain.

Food, housing, childcare, alcohol, energy and transport are all made more expensive by interventionist policies imposed by governments over the decades. Attempting to alleviate poverty through price caps, regulations and interventions - as proposed by both major political parties - will only make the problem worse. 

Key findings:

  • The Common Agriculture Policy of the European Union has resulted in food prices being almost 17 per cent higher for consumers in the UK due to tariffs, subsidies, and overly restrictive regulations.

  • Stamp duty and planning regulations have mean that renting or buying a home is now unaffordable for many people. The average monthly rental price in the UK is £350 more than the European average.

  • Despite being subsidised by taxpayers, childcare costsin the UK are very high compared with other major economies due to regulations.  If regulations were relaxed and followed a model similar to that in Sweden, the average UK household which uses childcare could save up to £7,732 each year on childcare costs.

  • Energy bills are high in the UK due to ‘green’ taxes which are used to pay for renewable energy subsidies. 9 per cent of the average household’s annual bill is a result of ‘green’ taxes. This amounts to £105 each year.

  • Transport is expensive in the UK due to fuel duty and government intervention in the railways. As a result of duties on fuel, motorists in the UK would are paying 77.08 pence more per litre for petrol and 77.20 pence more per litre for diesel.

  • The UK has one of the highest rates of Air Passenger Duty making holidays more expensive. For long haul flights, UK APD is £75.

  • Income tax, national insurance contributions, and council tax all take a sizeable amount of money away from households. In the financial year ending 2016,households paid on average £7,800 per year in direct taxes, equivalent to 18.7 per cent of their gross income.

  • VAT increases the price of goods significantly which results in further pressure being placed on household budgets. The average household spends £2,209 on VAT each year.

Click here to read the full report

Click here to watch our video on the housing crisis

Commenting on the report, John O’Connell, Chief Executive of the TaxPayers’ Alliance, said:

“There is an alarming lack of understanding amongst the leadership of the major political parties as to why so many people are struggling with the cost of living in Britain today. There is an unspoken, cross-party consensus that higher taxes, more regulation and greater government control of the economy are the solution but nothing could be further from the truth.

"Whether it's planning restrictions making it impossible for enough homes to be built and driving up prices and rents, or the EU’s Common Agricultural Policy increasing the price of food, everywhere you look politicians and bureaucrats are making people's lives harder.

"At the same time the government is planning to take the tax burden to its highest level since 1970 with regressive taxes on things like alcohol and fuel far higher than in almost all other comparable countries. But before we can even think about spending any of our hard earned money, politicians raid our pockets by taking away over a third of it through direct and indirect taxation.  

"It’s time for politicians to wake up to the fact that big government and higher taxation is bleeding Britons dry and making families worse off. Theresa May should stand by her defence of free markets by lowering the burden of taxes and regulations, scrapping the EU’s food taxes post-Brexit and liberalising the planning system so that more houses can be built."

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