Dr Eamonn Butler is the Director of the Adam Smith Institute.
At (long) last, it’s Tax Freedom Day – that day in the year when the average UK citizen has earned enough to pay off all the taxes that politicians dump on them. Today, after more than five months of working for the Chancellor, we are finally starting to earn for ourselves.
That’s bad news, not just for taxpayers, but for the country. All our aspirations for health, social care, education, security, prosperity, environment and the rest depend on having a strong economy. But we’ve taken a big hit: look down any high street and it’s plain that we need to build new businesses, and expand the surviving ones, on a massive scale. And the one thing that kills business creation and investment is high taxes, because they raise the risks of something that is already risky.
Yet this Government – a Conservative Government – is raising taxes all over the place. This year, it plans to spend £1.05 trillion, paid for by you and me. That is £15,625 for every adult, child and infant, or £62,500 for a family of four. If you are silly enough to save, you will pay a ten per cent inflation tax on your nest-egg too. And if the Government can’t quite balance its books (which it can’t), it will borrow and get your children and grandchildren to pay instead.
You might think that only rich people pay so much tax. But taxes are everywhere. There’s income tax, of course, but also VAT on pretty much everything we buy. Plus duties on beer, wine, spirits, tobacco, petrol and much else. There are taxes on the oil, gas and electricity we use to keep warm. Taxes on travel, and taxes on our homes. Stealth taxes on our pensions. And maybe the most damaging of all, the absurd tax on jobs that is National Insurance – which this Government (yes, a Conservative Government) has increased.
Indeed, the total tax burden on the country, which Tax Freedom Day neatly measures, has increased, at a nose-bleedingly alarming rate – and not just because of Covid, or Brexit, or the Ukraine war. Governments – Tory, Labour or Coalition—have been upping our taxes for years. Back in 2015, Tax Freedom Day fell on May 20th, eighteen days earlier than this year. In 1996 it was May 1st, five weeks earlier. In the 1960s, it fell in mid-April—a full eight weeks’ less servitude than we endure today.
It’s serfdom: but even mediaeval serfs were better off. They only had to work around a third of their time on behalf of their feudal overlords. On OBR’s budget projections, Tax Freedom Day 2026 will fall on June 24th. In other words, we will be working nearly half our time for our political overlords. Working so they can spend our money on what they want, rather than what we want. Compared to today, even the era of arch-stealth-taxer Gordon Brown seems like paradise.
Government ministers are keen to big up post-Brexit Britain as a world player. But it is hard to see how we can regrow, recover and compete when so much of what we produce is consumed by a bloated bureaucracy.
We need a radical growth policy, yet the Government shows no sign of getting our growth-crushing tax burden down. Quite the opposite: they seem to be promoting one new high-cost project after another, creating one new bureaucracy after another, and distributing one new handout after another. It’s cakeism, and it doesn’t work. Before long, the politicians haven’t left people with enough money in their pockets to risk starting or expanding a business. Costs rise, revenue falls and we’re in a downward spiral like we were in the 1970s.
That downward spiral was reversed only by radical, but common sense policy. Eventually, you run out of other people’s money. You have to balance the books. You have to tighten the Government’s belt just as individuals and businesses have to tighten theirs. You have to kill inflation stone dead. You have to be clearly committed to creating a low-tax economy. You have to trim the bureaucracy and keep it out of productive people’s way. You have to stop interfering and trying to manipulate and second-guess markets. You have to take difficult decisions and weather the criticism you will assuredly get.
As part of that revival plan, we need a farsighted tax and spend reduction strategy. We need a clear commitment to reduce the burdens on working people. A commitment to enable people to keep more of their own money to spend and invest on their own plans – not Whitehall’s. To make space for people to grow their own businesses, boost jobs and revive economic life. Is that too much to ask of a Conservative Government?