Tax and Fiscal Policy

Government still adding nearly £19,000 per household to the national debt


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Comment on the government's latest tax and benefit changes

Commenting on the benefit and tax changes coming into force today, Mark Littlewood, Director General of the Institute of Economic Affairs, said:

“The truth is that the coalition government will add nearly £500bn to our national debt over this Parliament, nearly £19,000 per household. This vast sum of money we are spending on ourselves today will have to be paid off by our children and grandchildren. The belt tightening we are engaged in is small beer compared to the bill faced by the next generation for our largesse.

“Where the government can help households is to think again on tax. Tax rates are so high that government revenue could be increased by cutting them. The 50p top rate is a political stunt, which is almost certainly losing the Exchequer money. The hike in VAT may also cost money.”

Philip Booth, Editorial Director of the Institute of Economic Affairs said:

“The government has decided to use tax increases to achieve over 20% of its planned reduction in government borrowing. Today, some of those tax increases take effect. Given the already high levels of tax in the UK, the government should have avoided tax increases altogether as they will damage economic growth.

“Whilst the raising of the basic tax threshold is of course welcome, it is only being achieved by partially drawing more and more people into higher rates of tax. Higher rate tax is no longer targeted at the rich. This, combined with the VAT increases and national insurance changes, will damage incentives and growth.

“The UK needs radically lower public spending at less than 30% of national income (instead currently around half) so that we can have very much lower tax rates. The economic growth that would result would ensure that we were all better off.”

Notes to editors

To arrange an interview with Mark Littlewood, IEA Director General, or Prof Philip Booth, IEA Editorial Director, please contact Stephanie Lis, Communications Manager, 077 5171 7781, 020 7799 8900, [email protected].

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.

The IEA is a registered educational charity and independent of all political parties.



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