The Times (UK) December 27, 2006
Taxes set to keep rising for 50 years, Treasury figures show Gabriel Rozenberg, Economics Reporter
- Tax as a share of GDP to hit 41.6%
- Government spending at risk
Britons will have to pay ever higher proportions of tax for the rest of their working lives, the Government's own figures revealed.
Despite an unprecedented era of economic stability and growth, the burden of taxation is set to rise or stay constant in every decade for the coming 50 years, according to little-noticed forecasts published by the Treasury this month.
The Government's best estimate of the tax burden it will bequeath to future generations is printed in figures less than two millimetres in size and buried within an obscure document published alongside Gordon Brown's Pre-Budget Report (PBR).
Entitled Long-Term Public Finance Report: an Analysis of Fiscal Sustainability
Government spending is set to rise even faster, pushing the country's finances deeper into the red with every successive decade from the
2030s onwards.
Despite higher spending, the share going into education is set to decline, even though the Chancellor made cash for schools the centre-piece of his PBR.
The report also made clear that taxes will have to rise even more than planned, or spending be cut back, if the Government's hopes of keeping the national debt below 40 per cent of GDP for the next 50 years are to be met.
The Treasury's figures show that an additional fiscal tightening of
0.75 per cent of GDP -- equivalent to a tax rise of £10 billion in today's money -- will be needed from 2013 onwards.
The figures mark a serious deterioration from just four years ago. In the first such long-term report, published in 2002, in which the projections were based on a higher starting point, the Treasury estimated that taxes would fall as a proportion of GDP in most decades and decline to about 38.4 per cent by the 2050s.
John Hawksworth, head of macroeconomics at PricewaterhouseCoopers, said the rising tax revenues were the result of people working for longer than in previous generations.
But he also noted that, while demographic pressures on the NHS were factored in, no allowance had been made for the rising popularity of healthcare in a wealthier society.
"As technology advances, you create new treatments and equipment, and these tend to be relatively expensive," he said. "As people get wealthier, the demand for healthcare goes up more than proportionally.
"The Government's current policy is that the overwhelming funding for healthcare will still come from the NHS, so the apparent implication is that most of the additional demand will need to be met from public funds."
The latest report said that projections for health spending have changed because the future population is now expected to be less healthy than previously thought.
Its projections deliberately do not attempt to model the links between higher educational achievement, increased income and better health, which it argued could alter the picture substantially.
A Treasury spokesman said: "To assess the long-term sustainability it is necessary to look at expected future trends, but it is important to remember the uncertainties involved in any long-term modelling exercise.
"The facts are that the UK's tax to GDP ratio continues to rank well below the EU15 average, and is substantially below its peak of 39.1 per cent in the 1980s."