The Institute for Fiscal Studies (IFS) has claimed that taxes are on course to rise by £17 billion over the course of this Parliament, which would take the tax burden – the proportion of national income raised in taxes – to 37%, the highest level since 1986.
The think tank has released its ‘Green Budget’ – an annual report providing economic forecasting and analysis in association with Oxford Economics. It says that the ‘austerity regime’ of tax rises and spending cuts is set to continue well into the 2020s, after Chancellor Philip Hammond abandoned his predecessor George Osborne’s target of balancing the books by 2019.
Forecasts in the report estimate that the UK economy will grow by 1.6% in 2017 and will slow to 1.3% in 2018, hampered by inflation caused by the decline of the value of the pound after the EU referendum. It predicts that while the weaker pound will improve the performance of manufacturers and exporters, higher costs for consumers will more than erase this gain.
Andrew Goodwin, Senior Economist at Oxford Economics and co-author of part of the report, said: ‘Though the UK economy has continued to achieve solid growth, it has been almost entirely reliant on the consumer.
‘With spending power set to come under significant pressure from higher inflation and the welfare squeeze, the consumer will not be able to keep contributing more than its fair share. Exports should be a bright spot, but overall a slowdown in GDP growth appears likely.’