British households are far less able to deal with the credit crunch because taxes have risen by the equivalent of £6,520 per household compared to 1996/97 levels. This ratcheting up of the tax burden has been a steady feature of the Brown years but it is being felt with particular force now.
During the boom years, homeowners felt richer as their house price rose at the fastest rate in the OCED and borrowed massively. So now, when the debt tap is choking, millions of households are right up against it because of this higher tax take.
A tax cut is, of course, how to help people facing soaring food and fuel bills. But Brown has spent the money, and the bank bailouts mean even further tax rises. The above graph shows inflation-adjusted tax revenue divided by the number of households. The Treasury may argue taxes on businesses have risen too – but businesses can’t pay tax. Only people can. It’s a massive increase that the country struggled to bear in good times. In bad times, it’s a burden that will be felt all the more acutely.
Update: Guys, apologies for the late response. I was in Davys Wine Bar until too late last night. Plenty here, so I’ll do it as a PS. Yes, Luke, Guido et al, it is adjusted for inflation. (Hence the word “inflation-adjusted” in the text!) If it wasn’t adjusted for inflation the figure would be £7,800 for 2008/09 not £6,520 – a bigger figure, but a misleading one.
This is indeed the whole UK tax take (business and personal), expressed per family – not increases in personal tax. But, Jamie, who do you think pays the cost for taxes like the “climate change levy” etc? Businesses can only find that money by paying their staff less or charging customers more. Businesses can’t pay taxes, only people can, which is why I think it’s important to express the tax take as a share of households. There aren’t any other organisms in the country from whom to confiscate money. Business taxes cut salaries and jack up prices.
Mart is right to say the figures on real households will, of course, vary wildly. Some will be paying £2,000 more in tax, others £20,000 – but the above graph is an average. Either you do it this way, or you just say “taxes are up £173 billion” and no one has the faintest idea what that means (or the harm that it does). My above graph tries to make the tax take a real, rather than abstract figure.
Last Thursday, for example, the Daily Mail splashed on saying the bank bailout liability was £18,000 per taxpayer. The real figure would have varied hugely per taxpayer, of course, but I think they were exactly right to present the figure in that “per taxpayer” way. Otherwise the reader has no idea of how much they have been stung for. “Million”, “billion” and “trillion” can all sound the same to a taxpayer who just gets the feeling he’s being shafted. Government conducts its tax raids by making it all seem abstract.
My main regret is that it can’t include the cost of other harmful government actions – like regulation, EU protectionism and food prices driven up by this biofuels malarky.
Finally, if anyone really cares that much, the above graph was composed by taking HM Treasury’s “Public sector current receipts” measure, putting it into real terms using the GDP deflator and then dividing it by the (growing) number of UK households.
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