It is very rare to see anyone online calling for tax rises (with the noble exception of Patriotic Millionaires UK), it is much more common to see people calling for tax cuts.
Of course, it is easy to call for tax cuts, opposition politicians have been doing it for decades. What is harder is to explain how to make the maths work for the UK. Most attempts at this don’t go beyond; ‘cut benefits to pay for it’ or ‘tax less and growth will follow’.
The UK Treasury has long criticised politicians for not being honest with the public about taxes and the public for wanting Scandinavian levels of public spending but American levels of taxation.
Both of these criticisms are broadly true and we do need to start facing up to what is heading our way.
We have an aging population, as we have discussed in this blog before. This means that we have a tsunami of public spending coming our way in the next few years, much of it on the retired population (who are good at voting and most people don’t see as ‘benefit scroungers’). The madness of the triple lock on the state pension means that the cost of that benefit is rapidly increasing, added to the health care and social care costs of the same population living longer which are accelerating.
In addition to this, years of austerity didn’t reduce public expenditure but just postponed it. Postponed expenditure is of course more costly in the long run as costs inflate and it is more expensive to replace than repair. You just need to look at the state of public infrastructure, from local roads, to trains, to hospitals, to rivers, to GPs to see the problem.
We know that there is a lot of government spending needed just to get the country back to where we were a couple of decades ago. We also know that thanks to Covid we no longer have the capacity we once had to borrow.
The above demographic timebomb, immigration resistance and depleted natural capital, also make it hard to see how growth is going to be achieved (grow the pie and the % tax take becomes a bigger number).
So, if we need more national income, what can we do?
Well, we can start by reforming our tax system and we will look at this next.
If you want help with paying the right amount of tax for you, contact one of our advisers via our office in Hook, Hampshire. If you just have an investment manager and therefore do not get tax advice (or financial planning), it is especially important that you get in touch.