Labour’s Budget ‘accelerates Britain’s journey to a high-tax, high-spend nation’ as the tax burden soars to a record high and spending heads to £1.5 trillion, a new report has warned.
The Centre for Policy Studies (CPS), a right-wing think-tank, said Chancellor Rachel Reeves was ‘choking off growth’ with a plan that offered ‘little optimism for families, workers and young people’.
It is the latest analysis to decry Ms Reeves’s debut Budget last week – which saw her announce £40bn in tax rises.
They include a £25bn raid on employer national insurance that has been condemned by business leaders and economists as a tax on jobs because it will deter firms from hiring.
Official forecasts published by the Office for Budget Responsibility (OBR) show spending rising to £1.5trn by the 2029/30 financial year.
Rachel Reeves’ Budget has accelerated Britain’s journey to a ‘high tax, high spend nation’, a new report has warned
Robert Colville, director of the Centre for Policy Studies (CPS) said Labour’s Budget also represented ‘uncomfortably high levels of borrowing’
And taxes raked in by the Treasury, as a share of national income, will hit a record 38.3 per cent by 2027/28 before slipping only slightly to 38.2 per cent over the following couple of years.
The CPS analysis found this would be the highest ever on records going back to 1688, even including the world wars which were funded largely by borrowing rather than taxation.
CPS director Robert Colvile said: ‘This Budget significantly accelerates Britain’s journey to being a high-tax, high-spend nation, with both tax and spending left at historic highs, on top of uncomfortably high levels of borrowing.’
The think-tank said the Budget showed ‘Labour reverting to its traditional view that the state can and should dictate the direction of the economy’ resulting in ‘meagre growth and stagnant productivity’.
Economic growth between 2024 and 2029 is expected to average just 1.6 per cent a year – far short of Labour’s goal of achieving the highest sustained growth among the G7 group of major advanced economies, the report said.
When dividing up national income, or gross domestic product (GDP), per head, it will mean Britons on average being £10,000 poorer than they would have been if GDP her head had rebounded to the pace of growth seen before the 2008 financial crisis.
Meanwhile, the National Health Service (NHS) will by next year swallow up 17 per cent of day to day government spending, the CPS said.
And the £200bn budget for the NHS and social care will be roughly equivalent to the current GDP of countries such as New Zealand and Greece.
Taxes raked in by the Treasury, as a share of national income, will hit a record 38.3 per cent by 2027/28 (file photo)
The CPS said higher borrowing by the UK also meant that a debt crisis before 2029 was a ‘real possibility, especially if economic growth remains low and interest rates surge again’.
Last week, the Institute for Fiscal Studies (IFS) said that, coming on top of previous tax hikes since the pandemic, Reeves’s Budget meant Britain was facing a ‘decade of higher taxes’.
Meanwhile, credit ratings agency Moody’s said growth was likely to remain ‘muted’ while rival S&P said Britain’s financial position was now ‘constrained’.
Financial markets have already given the Budget a thumbs-down, with a sell-off of UK bonds that pushed the cost of government borrowing up to its highest level in a year.
And a snap survey of 700 bosses by the Institute of Directors (IoD) last week found that two thirds thought it would hit growth.