the tax burden under labour

The tax burden under Labour

Carl Emmerson

Christine Frayne

Gemma Tetlow

© Institute for Fiscal Studies 2005

Revenues since 1970–71

30.0

32.0

34.0

36.0

38.0

40.0

42.0

44.0

46.0

48.0

50.0

70

–7

1

75

–7

6

80

–8

1

85

–8

6

90

–9

1

95

–9

6

00

–0

1

05

–0

6

09

–1

0

Financial year

Pe

rce

nta

ge

of

na

tion

al i

nco

me

Net taxes and national insurance contributions

Current receipts

© Institute for Fiscal Studies 2005

National income ‘after tax’

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

76–7

7

80–8

1

85–8

6

90–9

1

95–9

6

00–0

1

05–0

6

09–1

0

Five year average ending

Rea

l p

erce

nta

ge

gro

wth

Current receipts

National income

National income minus current receipts

© Institute for Fiscal Studies 2005

Revenue and national income growth by parliament

Annualised average real increase (%) in:

Current receipts National income National income minus current

receipts

Conservatives 18 years 1.7 2.1 2.4

1st Labour parliament

2nd Labour parliament

Labour 8 years so far

Labour current plans

© Institute for Fiscal Studies 2005

Revenue and national income growth by parliament

Annualised average real increase (%) in:

Current receipts National income National income minus current

receipts

Conservatives 18 years 1.7 2.1 2.4

1st Labour parliament 5.0 3.3 2.3

2nd Labour parliament

Labour 8 years so far

Labour current plans

© Institute for Fiscal Studies 2005

Revenue and national income growth by parliament

Annualised average real increase (%) in:

Current receipts National income National income minus current

receipts

Conservatives 18 years 1.7 2.1 2.4

1st Labour parliament 5.0 3.3 2.3

2nd Labour parliament 2.3 2.5 2.6

Labour 8 years so far

Labour current plans

© Institute for Fiscal Studies 2005

Revenue and national income growth by parliament

Annualised average real increase (%) in:

Current receipts National income National income minus current

receipts

Conservatives 18 years 1.7 2.1 2.4

1st Labour parliament 5.0 3.3 2.3

2nd Labour parliament 2.3 2.5 2.6

Labour 8 years so far 3.3 2.8 2.6

Labour current plans

© Institute for Fiscal Studies 2005

Revenue and national income growth by parliament

Annualised average real increase (%) in:

Current receipts National income National income minus current

receipts

Conservatives 18 years 1.7 2.1 2.4

1st Labour parliament 5.0 3.3 2.3

2nd Labour parliament 2.3 2.5 2.6

Labour 8 years so far 3.3 2.8 2.6

Labour current plans 3.5 2.4 1.7

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative

Labour 1st term

Labour 2nd term

All announcements

Fiscal drag

Economic cycle

Other factors

Total 1.6% £19.6bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn

Labour 1st term –0.2% –£2.3bn

Labour 2nd term

All announcements

Fiscal drag

Economic cycle

Other factors

Total 1.6% £19.6bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn

Labour 1st term –0.2% –£2.3bn

Labour 2nd term

All announcements 0.5% £6.8bn

Fiscal drag

Economic cycle

Other factors

Total 1.6% £19.6bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn

Labour 1st term –0.2% –£2.3bn

Labour 2nd term

All announcements 0.5% £6.8bn

Fiscal drag 1.0% £12.4bn

Economic cycle 0.4% £5.1bn

Other factors –0.3% –£4.7bn

Total 1.6% £19.6bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn

Labour 1st term –0.2% –£2.3bn

Labour 2nd term

All announcements 0.5% £6.8bn

Fiscal drag 1.0% £12.4bn

Economic cycle 0.4% £5.1bn

Other factors –0.3% –£4.7bn

Total 1.6% £19.6bn 0.6% £6.9bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn 0.0% 0.0

Labour 1st term –0.2% –£2.3bn 0.0% –£0.5bn

Labour 2nd term 0.9% £11.6bn

All announcements 0.5% £6.8bn

Fiscal drag 1.0% £12.4bn

Economic cycle 0.4% £5.1bn

Other factors –0.3% –£4.7bn

Total 1.6% £19.6bn 0.6% £6.9bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn 0.0% 0.0

Labour 1st term –0.2% –£2.3bn 0.0% –£0.5bn

Labour 2nd term 0.9% £11.6bn

All announcements 0.5% £6.8bn 0.9% £11.1bn

Fiscal drag 1.0% £12.4bn 0.8% £9.6bn

Economic cycle 0.4% £5.1bn –0.3% –£3.8bn

Other factors –0.3% –£4.7bn –0.8% –£10.1bn

Total 1.6% £19.6bn 0.6% £6.9bn

© Institute for Fiscal Studies 2005

Contributions to changes in government revenue

Labour’s 1st term Labour’s 2nd term Labour to date

% GDP Cash % GDP Cash % GDP Cash

Conservative 0.7% £9.1bn 0.0% 0.0 0.7% £9.1bn

Labour 1st term –0.2% –£2.3bn 0.0% –£0.5bn –0.2% –£2.8bn

Labour 2nd term 0.9% £11.6bn 0.9% £11.6bn

All announcements 0.5% £6.8bn 0.9% £11.1bn 1.4% £18.0bn

Fiscal drag 1.0% £12.4bn 0.8% £9.6bn 1.8% £22.0bn

Economic cycle 0.4% £5.1bn –0.3% –£3.8bn 0.1% £1.3bn

Other factors –0.3% –£4.7bn –0.8% –£10.1bn –1.2% –£14.9bn

Total 1.6% £19.6bn 0.6% £6.9bn 2.1% £26.4bn

© Institute for Fiscal Studies 2005

Cumulative budgetary changes

-4.0-2.00.02.04.06.08.0

10.012.014.0

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Election 2001

© Institute for Fiscal Studies 2005

So to conclude

• Revenues up 3.3% per year over 8 years• Faster increase going forward• Lower economic growth expected• … and without introducing new measures• Policy measures yielded 2/3 of increase so far• More might be needed in the future?

The tax burden under Labour

Carl Emmerson

Christine Frayne

Gemma Tetlow