The United Kingdom is having national elections this year and campaigns are underway, but the governing Conservatives appear to be hoping voters won’t notice they are promising tax cuts while actually pushing taxation to historic highs by underhand means.
Prime Minister Rishi Sunak spoke to state broadcaster the BBC’s television news on Sunday and made clear his big offer to the country in the forthcoming general election this year was cutting taxes. While he played up a new tax cut that came into effect this weekend, Sunak has been hammered for failing to admit this much-vaunted cut is actually dwarfed by the total scale of tax rises.
Speaking to interviewer Laura Kuenssberg, Sunak said, “an average person working, earning £35,000 from this weekend is seeing a tax cut worth £450. That’s meaningful… that’s my priority going forward, it’s cutting people’s taxes… make sure we control spending, control welfare, so we can make sure we can cut taxes”. The BBC host pointed out far from giving British workers a tax cut, in fact, taxes are now at a record high.
Indeed, as reported in November when this tax ‘cut’ was first announced while the tax burden would continue to grow at a slightly slower pace in the coming years because of it, it did nothing to change the fact the tax burden on the UK is still the highest it has been since the end of the Second World War. As Torsten Bell of the Resolution Foundation remarked at the time, “Even after today’s tax cuts, the tax burden reaches its highest level for 70 years – up by well over £4,000 per household since on pre-pandemic levels”.
It is hard to overcome massive tax rises — many of them stealth tax rises, achieved through ‘fiscal drag’ — with an election-time cut amounting to just £8 ($10) a week for an average income salary.
The Spectator, the British publication which could possibly be relied upon more than any other to be persistently pro-Conservative has also drawn attention to the attempt. If the Conservatives have lost the venerable Speccie they truly are in trouble.
Editor Fraser Nelson points out in a “fact check” article that Sunak appears to be attempting to say taxes are falling “so often that people start to believe him rather than their own lying payslip”, expressing the stealth tax issue in his own way. Nelson wrote: “For every £1 cut by his National Insurance tax reductions (which have now come into effect) he is raising £4 by stealth taxes. Freezing the thresholds and allowances etc rather than lift them in line with earnings or inflation is a massive tax rise… is plans mean that within four years, someone on £35k will be paying £440 a year more in tax overall due to all of the various changes.”
Much of the new taxation comes from a phenomenon known as fiscal drag, where the state ties taxation levels to absolute levels of income which then don’t change as inflation erodes away purchasing power, or at least rise less quickly than inflation. For instance, in the United Kingdom higher rate taxation kicks in at £50,271, where it has been stuck for years. Every year where inflation slowly pushes wages upwards for comparable jobs and the government freezes the thresholds, it takes more money in taxation without any headline-grabbing official tax increases.
While the impact of this year-on-year can go relatively unnoticed, taking a longer view shows the degree to which these traps will eventually come for all workers. The UK higher rate tax was introduced to take more from those who, the theory went, could afford to pay more — the professional middle class and the better-off. Decades later in 2024, the tax is paid by hundreds of thousands of thousands of teachers, police officers, and nurses, professions most would agree don’t feel wealthy enough to be considered ‘high’ earners.
It is the creeping nature of fiscal drag that leaves it called, in simple terms, a “stealth tax”. This was already a well-known phenomenon at the start of the Conservative Party’s 13 years in power, and yet they have done nothing to combat it, as trust conservatives would, preferring to keep raking the money in and growing the state.
The United Kingdom is likely to hold a general election in the second half of 2024, although by law it could be held as late as January 2025. The political parties are transitioning into campaign mode, and after over a decade of failing to deliver on the priorities of their own voters — not just taxes and the economy, but border control and culture — and in spite of their warnings that a Labour government presents a danger to the country, the Conservatives are polled to perform very poorly and leave government.
Brexit leader Nigel Farage, who stood his party aside at the last party to permit the Conservatives a sweeping victory in order to get Britain out of the European Union, has warned the party — after its failures — needs to be “taught an unforgettable lesson” at the ballot box this year. He said at the weekend: “Rishi Sunak comes out with the same drivel we get from the Tories at every election… His constant lies and spin on everything from tax to the Channel crossings are making me think that perhaps he needs to be taught an unforgettable lesson.”
Reform UK, the former Brexit Party which Farage led is in contention for third place in the General Election for votes if not for seats, given the way the UK election system excludes startup parties which don’t have a particular geographical tie. Their manifesto touches on the taxation issue, noting ” income tax was a temporary tax on the rich to pay for a war
over 200 years ago” and calls for “cutting taxes and simplifying taxes”, including not requiring the bottom fifth of earners to pay taxation at all.