The future of tax and spending in the UK
Discussion
It seems to me that we are on the cusp of a secular change in taxation and spending policy in the UK. The Thatcher era consensus of lower taxes being economically advantageous no longer appears to hold sway for the majority of people. I get that most people think it's a great idea for other people to pay more tax but even beyond that I think there is a noticeable change in attitude. Part of it is the pandemic but even before that it had been a developing story for some time. I was less than happy at the rise in Corporation Tax last week, mainly because it was business that appeared to be bearing the brunt of the epidemic for largely political reasons. However, it did start me looking at comparative examples of taxation in other countries.
Having looked at the figures, our tax burden as a proportion of GDP is going to rise to 36%. Apparently this is a 50 year high. However, on a comparative basis, we tax somewhat less than the European average. France rests at 44% and Germany 38%. The USA is on 28%.
The reform of social care and ageing demographics in general will drive increased spending for the near future and absent a rise in productivity back to the 2.5% or so last seen in the mid 2000s, it seems to me that taxes will naturally rise. What has changed, however, is that people actively want more tax and spending.
Now being of a centre right disposition, I instinctively think higher taxes are doomed to fail beyond the short term. However, the evidence is pretty mixed that lower tax economies are more prosperous and indeed happier.
I think we should try higher taxation for everyone for two main reasons. If it is a disaster it will be done and dusted in an electoral cycle and another generation will learn that lesson. However, there remains the possibility that it will take us somewhere different. And given the fractured nature of the UK on so many levels, it seems to me that it is something worth exploring. And yes I could pay more tax voluntarily but the cultural change required to make this work is that everyone needs to face up to a (progressively) higher tax burden.
The NHS pay thread is just a symptom of a wider problem. We can in the short term afford to pay people more by raising taxation. The question is whether that is desirable or indeed sustainable in the longterm unless it drives higher productivity.
What do others think?
Having looked at the figures, our tax burden as a proportion of GDP is going to rise to 36%. Apparently this is a 50 year high. However, on a comparative basis, we tax somewhat less than the European average. France rests at 44% and Germany 38%. The USA is on 28%.
The reform of social care and ageing demographics in general will drive increased spending for the near future and absent a rise in productivity back to the 2.5% or so last seen in the mid 2000s, it seems to me that taxes will naturally rise. What has changed, however, is that people actively want more tax and spending.
Now being of a centre right disposition, I instinctively think higher taxes are doomed to fail beyond the short term. However, the evidence is pretty mixed that lower tax economies are more prosperous and indeed happier.
I think we should try higher taxation for everyone for two main reasons. If it is a disaster it will be done and dusted in an electoral cycle and another generation will learn that lesson. However, there remains the possibility that it will take us somewhere different. And given the fractured nature of the UK on so many levels, it seems to me that it is something worth exploring. And yes I could pay more tax voluntarily but the cultural change required to make this work is that everyone needs to face up to a (progressively) higher tax burden.
The NHS pay thread is just a symptom of a wider problem. We can in the short term afford to pay people more by raising taxation. The question is whether that is desirable or indeed sustainable in the longterm unless it drives higher productivity.
What do others think?
Edited by ant1973 on Monday 8th March 09:49
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