The next five years will see Britons paying higher taxes. That, amid the noise of the general election campaign, is tacitly acknowledged by both major parties. There are naturally questions as to how large the additional burden might be and how it might be distributed, but the underlying mathematics of public spending don’t change. One way or another the next government will be a prisoner of the maths. The combination of the rising cost of meeting the needs of an ageing population, coupled with the general pressures on public spending after the long squeeze, mean that the next government will need to raise more resources. Some may come from growth, but most will come from higher taxation.
You can see this in the plans of both Labour and Conservatives. We don’t have total clarity on either, for promises are made in the cut and thrust of the campaign, but we know enough to sketch the outline.
For Labour the thrust is on fairness. The Shadow Chancellor, John McDonnell has made clear his general opposition to most tax increases, including a rise in national insurance and VAT rates. Those are two of the three largest taxes, the other being income tax. There he has suggested that people earning more than £70,000 a year. Approximately 5 per cent of Britons earn more than this. The suggestion here is that the top rate of income tax should rise from 45 per cent to 50 per cent.
The main source of additional revenue sought by Labour would be from companies, reversing the Conservatives progressive cuts in corporation tax, and tightening up on tax avoidance and evasion. Mr McDonnell has said he is opposed to the so-called mansion tax, but has not ruled out higher taxes on property generally.
The Conservatives acknowledge that taxes will rise for the rich. They too have ruled out any increase in VAT – Theresa May has just made that explicit – but have not ruled out changes in income tax or national insurance. They have also avoided any commitment on…