UK Chancellor Jeremy Hunt presented his Budget on Wednesday, announcing a cut to National Insurance. Hunt said that the Budget would “put the country back on the path to lower taxes”. However, Labour leader Keir Starmer criticised the Budget, saying that Conservatives have taken “an unprecedented hit” on living standards.
BBC News has compared their competing claims. The UK economy grew faster than Germany over the past year, but not France or Italy. However, Mr Hunt was correct in saying that for the whole period the Conservatives have been in power, the UK has grown more than all three of them. Gross Domestic Product (GDP) in the UK has grown by 21% since 2010, while Germany’s GDP has grown by 18%, France’s by 15%, and Italy’s GDP has grown by only 4%. But if we measure GDP per person, which excludes the effect of the growing population, Germany has performed better than the UK during the same period.
Starmer was correct when he stated that the overall level of taxation last year was the highest for more than 70 years. The Office for Budget Responsibility predicts that it will collect 37.1p of every pound generated in the economy in 8-9. This would be the highest level in 80 years. It is important to realise that this is the total tax take and includes taxes on property sales, holiday lets and companies, not just personal taxes, national insurance or VAT.
The Chancellor, Jeremy Hunt’s fiscal rule, set out in the Budget, states that debt should be on track to fall in five years. The OBR predicts that this will happen. However, this does not mean debt is reducing now or in the next few years. For the next three years, the OBR predicts that the excluding Bank of England debt will be higher and will only decrease from 2028-29. Previously, the Prime Minister had gotten into trouble with statistics regulators for stating that debt was falling when it was just predicted to fall in five years.
Starmer criticised the debt level by referring to the “nation’s credit card.” However, it is misleading to compare a nation’s finance to household finance. The review of the reporting by Sir Andrew Dilnot, former chair of the UK statistics regulator, concluded that household analogies are dangerous territory and can easily mislead. In 2022, the expected UK debt is 97.6% of GDP, compared to the G7 where only Germany has lower debt.
Finally, Jeremy Hunt stated that the average earner in the UK now has the lowest effective personal tax rate since 1975. This statement is about the amount of National Insurance (NI) and income tax that an average, full-time, single earner with no children, and doesn’t receive benefits pays. The Resolution Foundation think tank agrees with the calculations for this very specific person. However, on average, all earners are paying more. The Institute for Fiscal Studies reported that overall, for every £1 the government has cut from NI, it has taken £1.30 with its freezes to tax thresholds over the last few years
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