The biggest tax cuts since the 1980s were announced last week, but also published were official forecasts confirming that the tax burden was rising to a postwar high, thanks to far larger tax rises already in train. So why is a government that wants to cut taxes raising them?
For Tory backbenchers, an oddly popular answer is Jeremy Hunt (they seem weirdly convinced he is a tax-and-spend socialist). Labour, meanwhile, argues that taxes are up because the government is useless. Persistently weak growth isn’t helping, but a change of government won’t magically see taxes plummet.
Better clues as to why taxes are rising, even as public services are crumbling, comes from those official Office for Budget Responsibility forecasts. Taxes are up because we’re spending more, though not on the things that frothy-mouthed libertarians think. Instead, Britain’s becoming an older and sicker country: as interest rates rise, taxes are pushed up.
Higher interest rates have doubled the cost of government debt to £116bn, over 4% of GDP, the highest since the Second World War. That’s more than the education or defence budgets – only health costs more. The chancellor, not just mortgagors, is praying for lower rates.
Our older and sicker population has a big price tag. Spending on working-age health and disability benefits is heading to £71bn by 2028-29, a 51% increase from today. We can’t get younger but, if we want lower taxes, we should get serious about becoming healthier.
There are always political choices about the size of the state, but those choices are taken in a world shaped by forces only partly under politicians’ control. Taxes are up for a reason, and are likely to stay that way.
• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org
