Line chart of all UK taxes as a percentage of GDP from 1948 to 2028/29, showing the governing party: UK taxes as a share of GDP fluctuated mostly between roughly 28% and 35% between 1952 and 2019 across both Labour and Conservative governments. After 2019 under the Conservative government, the tax burden rises sharply, passing 36% in 2023/24 and projected to reach over 37% by 2028/29, reaching its highest level since 1948. Title: All UK taxes as a % of GDP, 1948 to 2028/29, showing party in power Y-axis: 25%, 27%, 29%, 31%, 33%, 35%, 37%, 39% X-axis: 1948, 1950, 1952, 1954, 1956, 1958, 1960, 1962, 1964, 1966, 1968, 1970, 1972, 1974, 1976, 1978, 1980, 1982, 1984, 1986, 1988, 1990, 1992, 1994, 1996, 1998, 2000, 2002, 2004, 2006, 2008, 2010, 2012, 2014, 2016, 2018, 2020, 2022, 2024, 2026, 2028 Background shading indicates party in power: - 1948 to 1951: Red (Labour) - 1951 to 1964: Blue (Conservative) - 1964 to 1970: Red (Labour) - 1970 to 1974: Blue (Conservative) - 1974 to 1979: Red (Labour) - 1979 to 1997: Blue (Conservative) - 1997 to 2010: Red (Labour) - 2010 to 2024: Blue (Conservative / Coalition) - 2024 to 2028/29: Unshaded (forecast) Key approximate line values: 1948: ~37.2% 1950: ~36.8% 1960: ~27.9% 1970: ~35.2% 1972: ~29.8% 1975: ~33.4% 1979: ~30.3% 1982: ~34.0% 1993: ~28.4% 2000: ~33.1% 2002: ~31.4% 2007: ~33.8% 2009: ~32.2% 2011: ~33.5% 2014: ~32.6% 2018: ~33.9% 2019: ~33.1% 2022: ~36.3% 2023: ~35.9% 2028/29 (projected): ~37.1%

Why the general election tax debate is irrelevant

General ElectionInfographics
6 June 2024

12 Comments

The general election tax debate has been irrelevant. The few £bn being discussed is dwarfed by the actual tax UK tax increases over the last few years, and the further tax increases we’ll almost certainly see in the future.

I summarised this point on Sky TV on Wednesday.

Here’s all UK taxes paid in 2023-24:

Treemap chart showing UK tax receipts for 2023-24, totalling £980bn: UK tax revenue is heavily dominated by Income tax (£276bn), VAT (£199bn), and National insurance (£180bn), which together comprise around two-thirds of the £980bn total. Corporation tax accounts for £98bn, while all other individual taxes generate £45bn or less each. UK tax receipts 2023-24 - total £980bn Income tax: £276bn VAT: £199bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Tobacco: £9bn Environmental taxes: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares... Bank taxes: £3bn

Here’s what happens if we add on the Conservative Party’s extremely debateable claim that Labour will increase household taxes by £2,000 over four years – that’s about £10bn in total:

Treemap chart of UK tax receipts 2023-24 with a hypothetical "£2,000 tax rise" shown as a small red square: UK tax revenues are heavily dominated by income tax (£276bn), VAT (£199bn), and National Insurance (£180bn), followed by corporation tax (£98bn). The hypothetical "£2,000 tax rise" (shown as a small red box within income tax) is very small relative to the overall scale of UK tax receipts. UK tax receipts 2023-24 - with the hypothetical "£2,000 tax rise" Values by tax: - [Hypothetical "£2,000 tax rise"]: represented by a small solid red square in the top-left corner of the Income tax block - Income tax: £276bn - VAT: £199bn - National insurance: £180bn - Corporation tax: £98bn - Council tax: £45bn - Other taxes: £31bn - Business rates: £27bn - Fuel duties: £25bn - CGT: £15bn - Stamp duty on land: £13bn - Alcohol: £13bn - Tobacco: £9bn - Environmental taxes: £9bn - IPT: £8bn - Vehicle duties: £8bn - IHT: £7bn - Customs: £5bn - APT: £4bn - Stamp duty on shares: £3bn - Bank taxes: £3bn

£10bn is just an irrelevance in the context of almost a trillion pounds of total tax receipts. And it vanishes into statistical noise when we remember that OBR tax receipt forecasts are lucky to get within £30bn of the true figure.

And here’s Labour’s actually announced tax increases::

Treemap chart showing UK tax receipts for 2023-24 alongside Labour's proposed tax rises: The vast majority of UK tax receipts come from Income tax (£276bn), VAT (£199bn), and National insurance (£180bn). By comparison, Labour's proposed tax rises, represented by a small red box in the top-left corner, are very small relative to total revenue. UK tax receipts 2023-24 - with Labour's own proposed tax rises Income tax: £276bn (includes a small red unlabelled square at the top left) VAT: £199bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Tobacco: £9bn Environmental taxes: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares: £3bn Bank taxes: £3bn

Also an irrelevance.

By contrast, here’s the OBR’s projections for the overall increase in taxation as a % of GDP from 2023/24 to 2028/29:

Treemap chart of UK tax receipts for 2023-24 showing projected increases to 2028-29: UK tax revenues are dominated by Income tax (£276bn), VAT (£199bn), and National insurance (£180bn), followed by Corporation tax (£98bn) and Council tax (£45bn). A prominent red block overlaid on Income tax illustrates the scale of the projected increase from 2023/24 to 2028/29. UK tax receipts 2023-24 - showing increase ONS projects from 2023/24 to 2028/29 Income tax: £276bn [includes an inset red square in top-left representing the projected increase] VAT: £199bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Tobacco: £9bn Environmental taxes: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares: £3bn Bank taxes: £3bn

The bigger picture

The current level of taxation follows a few years of significant increases in tax.

Here’s how much of the 2023/24 tax burden reflects an increase since 2010:

Treemap chart of UK tax receipts in 2023-24, highlighting the actual increase since 2010: UK tax receipts in 2023-24 are dominated by income tax (£276bn), VAT (£199bn), and National Insurance (£180bn), followed by corporation tax (£98bn) and council tax (£45bn). A prominent red square overlaid within the income tax block illustrates the size of the actual increase since 2010. UK tax receipts 2023-24 - showing actual increase since 2010 Income tax: £276bn (contains an unlabelled red square representing the increase) VAT: £199bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Environmental taxes: £9bn Tobacco: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares: £3bn Bank taxes: £3bn

And here’s the OBR’s expected overall increase in taxation from 2010 through to 2028/2029:

Treemap chart of UK tax receipts for 2023-24 with a red block indicating projected growth: Income tax (£276bn), VAT (£199bn), and National Insurance (£180bn) make up the overwhelming majority of UK tax receipts. A superimposed solid red square illustrates the substantial scale of the total increase in tax receipts projected by the OBR/ONS from 2010 to 2028/29 relative to individual tax revenues. UK tax receipts 2023-24 - showing increase ONS projects from 2010 to 2028/29 [Solid red block superimposed over the upper left portion of the income tax block] Income tax: £276bn VAT: £199bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Environmental taxes: £9bn Tobacco: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares: £3bn Bank taxes: £3bn

This is dramatic, but not in the main the result of policy choices – it’s largely a function of demographic change and systemic shocks from the financial crisis and the pandemic (and, to a smaller degree, Brexit). And any attempt to convert these figures into “per household” numbers would be highly misleading given that many ordinary households have not seen an increase at all.

The European picture

Even the charts above leave us a long way off European levels of taxation.

Here’s the additional tax we’d be paying if we increased UK tax to the average 2023/24 level in the Euro-area:

Treemap of UK tax receipts for 2023-24 showing the additional tax required to match average Euro area taxation: Raising UK tax receipts to match the Euro area average would require an increase represented by the EU flag block, which is comparable in scale to VAT (£199bn) or Income tax (£276bn), and far exceeds receipts from Corporation tax (£98bn) or Council tax (£45bn). UK tax receipts 2023-24 - showing increase to match average Euro area taxation [Block showing EU flag with 12 gold stars on blue background, representing the increase to match average Euro area taxation] Income tax: £276bn VAT: £199bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Tobacco: £9bn Environmental taxes: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares: £3bn Bank taxes: £3bn

And here’s the increase if we matched France:

Treemap chart of UK tax receipts for 2023-24, illustrating the increase required to match French taxation: The largest identified UK taxes are income tax at £276bn, national insurance at £180bn, corporation tax at £98bn, and council tax at £45bn. The top left features two large unlabelled sections—one styled as the French national flag and an adjacent plain grey block—visually demonstrating the gap needed to equal French taxation. UK tax receipts 2023-24 - showing increase to match French taxation Income tax: £276bn National insurance: £180bn Corporation tax: £98bn Council tax: £45bn Other taxes: £31bn Business rates: £27bn Fuel duties: £25bn CGT: £15bn Stamp duty on land: £13bn Alcohol: £13bn Environmental taxes: £9bn Tobacco: £9bn IPT: £8bn Vehicle duties: £8bn IHT: £7bn Customs: £5bn APT: £4bn Stamp duty on shares: £3bn Bank taxes: £3bn [Unlabelled block displaying the French tricolour flag: blue, white, red] [Unlabelled grey block]

The difference is massive – more than the total UK VAT and corporation tax receipts.

The tax debate I’d like to see

So my plea to everyone is: stop discussing irrelevant amounts of tax as if it matters.

Here are three honest positions politicians could take:

  • Accept the status quo, and that the UK will, by 2028/29, pay about £100bn more tax than it did in 2010/11 (in 2023/24 money). Make changes at the margins but acknowledge that’s all they are. The question then is: where will this burden fall? And what will the consequences of that be?
  • Advocate for significantly lower taxes, and (assuming you don’t want to crash the markets) explain which public services you’ll cut to fund the tax cuts, and the consequences of this for households and the wider economy.
  • Advocate for a significantly higher level of state spending, comparable with the European or even French figures. Again assuming you don’t want to crash the markets, explain what taxes you’d increase, and the consequences of that for households and the wider economy. And expect everyone to be sceptical if you claim only the rich would pay, because that’s not what happens in any of the countries that actually do have significantly higher spending than the UK.

And let’s please try to be careful not to fall for simple stories about political parties and levels of tax. If we take tax as a % of GDP over the last eighty years, and shade in periods of Labour government (red) and Conservative government (blue), it’s reasonably clear that the economic cycle has been much more important than the political cycle:

Line chart of all UK taxes as a percentage of GDP from 1948 to 2028/29, showing the governing party: UK taxes as a share of GDP fluctuated mostly between roughly 28% and 35% between 1952 and 2019 across both Labour and Conservative governments. After 2019 under the Conservative government, the tax burden rises sharply, passing 36% in 2023/24 and projected to reach over 37% by 2028/29, reaching its highest level since 1948. Title: All UK taxes as a % of GDP, 1948 to 2028/29, showing party in power Y-axis: 25%, 27%, 29%, 31%, 33%, 35%, 37%, 39% X-axis: 1948, 1950, 1952, 1954, 1956, 1958, 1960, 1962, 1964, 1966, 1968, 1970, 1972, 1974, 1976, 1978, 1980, 1982, 1984, 1986, 1988, 1990, 1992, 1994, 1996, 1998, 2000, 2002, 2004, 2006, 2008, 2010, 2012, 2014, 2016, 2018, 2020, 2022, 2024, 2026, 2028 Background shading indicates party in power: - 1948 to 1951: Red (Labour) - 1951 to 1964: Blue (Conservative) - 1964 to 1970: Red (Labour) - 1970 to 1974: Blue (Conservative) - 1974 to 1979: Red (Labour) - 1979 to 1997: Blue (Conservative) - 1997 to 2010: Red (Labour) - 2010 to 2024: Blue (Conservative / Coalition) - 2024 to 2028/29: Unshaded (forecast) Key approximate line values: 1948: ~37.2% 1950: ~36.8% 1960: ~27.9% 1970: ~35.2% 1972: ~29.8% 1975: ~33.4% 1979: ~30.3% 1982: ~34.0% 1993: ~28.4% 2000: ~33.1% 2002: ~31.4% 2007: ~33.8% 2009: ~32.2% 2011: ~33.5% 2014: ~32.6% 2018: ~33.9% 2019: ~33.1% 2022: ~36.3% 2023: ~35.9% 2028/29 (projected): ~37.1%

Finding answers is hard – but let’s at least try to ask the right questions.

Footnotes

  1. The source is the receipts figures from the OBR’s public finances databank. This is the raw data – the only change I’ve made is aggregating taxes that raise less than £3bn into the “other taxes” bucket. The OBR’s most recent economic and fiscal outlook is here. ↩︎

  2. Here I’ve just taken their £38.5bn over four years and divided it by four, i.e. £9.6bn. ↩︎

  3. The most recent error was £36bn – see the OBR’s October 2023 forecasting evaluation report, table 3.1. ↩︎

  4. About £10bn in total – a very similar amount to the Conservative estimate, but raised from different people. £5bn from “cracking down on tax dodgers“, £1.7bn from VAT on private school fees, about £1bn from “closing non-dom loopholes“, about £2bn from extending the energy “windfall tax” ↩︎

  5. The source is the receipts figures from the OBR’s public finances databank. The tax increase is calculated by simply taking the difference between tax receipts as a % of GDP in 2023/24 vs 2028/29 (1.2%), and multiplying this by the UK GDP figure used in that same dataset. This results in £30bn. We’d of course get a much larger number if we looked at the real terms difference between cash tax receipts over that period – £114bn – but it’s a fairer comparison to calculate by reference to GDP. ↩︎

  6. Same OBR source. The tax increase is calculated by simply taking the difference between tax receipts as a % of GDP in 2023/24 vs 2010/11 (2.7%), and multiplying this by the UK GDP figure used in that same dataset. This results in £70bn. We’d of course get a larger number if we looked at the real terms difference between cash tax receipts over that period – £216bn – but it’s a fairer comparison to calculate by reference to GDP. ↩︎

  7. Same methodology but looking at the 2028/29 OBR receipts figures and forecast. The increase in tax as a % of GDP over this period is 3.9% which equates into £100bn in 2023/24 money. If we look at the real terms difference between cash tax receipts over this period we’d get £330bn. ↩︎

  8. Source is Eurostat – average 2023/24 figure is 41.9%, equating to £152bn more tax if we apply to UK GDP for 2023/24. We aren’t aware of projections for 2028/29, but we assume the figure will be materially higher. So the fair comparison isn’t with the 2028/29 chart immediately above, but the 2023/24 chart before that. ↩︎

  9. Source again is Eurostat – the French figure for 2023/24 is 49%, equating to £334bn more tax if we apply to UK GDP for 2023/24. One would assume the figure will be higher for 2028/29 but it’s not clear how high it can realistically go. But again the fair comparison is with the UK 2023/24 chart not the 2028/29 chart. ↩︎

  10. In principle there is an alternative; boost productivity and grow the economy. It was economic growth that enabled significant rises in public spending in the 2000s without significant tax rises. But even if this could be achieved, it’s not going to move the dial much in the next few years. ↩︎

  11. And from 2010-2015, Conservative/Lib Dem coalition ↩︎

Further reading

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12 responses to “Why the general election tax debate is irrelevant”

  1. Brendan avatar
    Brendan

    It would be great to see an update of this that reflects the recent Budget and how it differs from those pre-election forecasts!

    Reply
  2. Andrew Johnson avatar
    Andrew Johnson

    I would be very interested to know what is needed in the future to fund state employees index linked pensions (police, fire service, civil servants, nhs etc etc) over the next 10, 20 and 30 years. I suspect the figures are mind boggling.

    Reply
  3. Rik avatar
    Rik

    Hi
    Love the article but the charts do not seem to change. It’s the same stats on every chart.

    Reply
    1. Dan avatar
      Dan

      there’s a red rectangle on each chart showing the additional tax in each scenario, overlaid on the current UK tax revenue stats

      Reply
  4. Tunde Suleiman avatar
    Tunde Suleiman

    Thank you very much Dan, I love this type of big picture article that help me understand what’s happening.
    Of the possible positions, you suggested that politician could take, 2 are constrained by the market.
    In big picture terms “who” makes up the market. Seems everyone needs to dance to the tunes of the this “market”. Is there any thing you can point me to that will help me understand in big picture terms who is the market and what it wants?

    Reply
    1. Dan avatar
      Dan

      I’d look at what happened when Liz Truss tried unfunded tax cuts. The “market” is just people not being less willing to lend to a government that looks fiscally irresponsible.

      Reply
  5. Paul Flatt avatar
    Paul Flatt

    I spend a fair amount time watching & commenting on the UK dairy foods sector. One developing trend I have seen in recent years is tax avoidance by creation of ‘groups’ and holding companies for very simple, small scale enterprises. Compounding this is the matter of supposed director loans, inter-company loans and so forth, and a not insignificant tax revenue has been spirited away. I want to see the next government focus on such tax avoidance (however legal) – first and foremost, to show other tax payers that the system is fair and equitable. But of course, the extra income will also be useful!

    Reply
  6. StephenB avatar
    StephenB

    Thanks,Dan. An interesting read, but I question whether the infographics effectively convey your message. When the red squares are introduced, they cover up what was previously shown as blue income tax rectangle – making it appear smaller. Indeed, there is less area of blue.
    One option would be to show the red square as its own top left rectangle and let the rest of the diagram adjust. (But maybe the software does not allow top left rectangle be anything other than the biggest number.)

    I would be interested to see the growth in each of the categories of tax since 2010 presented in this graphical format. (Assuming the none of the categories has reduced – since negative areas cannot be easily shown!)

    Reply
  7. Andy McGregor avatar
    Andy McGregor

    An excellent article.
    I especially liked the graphics.
    Why can’t mainstream media produce stuff like this? It’s almost as if they were in cahoots with political parties to keep the people in the dark!

    Reply
  8. Mark de Brunner avatar
    Mark de Brunner

    Hi Dan – another great article. I agree with everything you say, except for one point. I don’t think the general tax debate is entirely irrelevant to the extent that it reveals a readiness to say things that are untrue. It was not true for the prime minister to say on Tuesday evening that the figure he put on Labour’s tax plans had come from “independent Treasury officials”.

    Perhaps his defence is that he didn’t know it was untrue. That seems unlikely, given that, a day earlier, the Treasury permanent secretary had written to the shadow chief secretary making clear that a Conservative analysis of Labour spending and tax policy included costs beyond those provided by officials and pointing out that costings from unofficial sources “should not be presented as having been produced by the civil service”. The letter said that ministers had been reminded of this.

    But whether this was deliberate dishonesty or merely a failure to get on top of the facts it does not reflect well on the prime minister and can only contribute to the erosion of trust in politicians and politics. In that sense, the debate matters.

    You are of course right about the unimportance of the relatively trivial numbers currently being discussed by the main parties. I share the frustration of those who want a more sensibly framed debate, which acknowledges the major challenges that the public finances face. But we won’t get anywhere near that if we can’t even trust claims made about the small stuff.

    Keep up the good work!

    Reply
  9. Eoin Kennelly avatar
    Eoin Kennelly

    Fantastic article!

    Could you do the same for Ireland?

    Our general election expected in November 2024

    Reply
    1. Dan avatar
      Dan

      thanks – that’s really kind, but unfortunately we don’t have capability to do that…

      Reply

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