Corin-Taylor

Budget 2008: Taxing issues

The discussion around Alistair Darling’s first Budget is likely to be dominated by immediate worries, such as non-dom taxation, capital gains tax, the rising budget deficit, Northern Rock, and the impact of the credit crunch on economic growth.  These are all issues of paramount concern.  But it’s important not to forget the negative longer-term effects of fiscal policy in recent years.

Public spending has surged since 2000.  On the OECD numbers, it has increased from 37.5 per cent of GDP in 2000 to 45 per cent last year – an increase unprecedented during a peacetime period of steady economic growth.  In 2000, Britain’s public spending as a share of national income was below the OECD average.  It is now 4.5 percentage points higher. 

This “flash flood” of government spending, to use Reform’s illuminating phrase, has failed to deliver anything like commensurate results.  To take three examples:

Firstly, spending on healthcare has risen in real terms (2005-06 prices) from £57.3

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