The TaxPayers' Alliance - Economics 101

Council tax in the Pre-Budget Report

PRE-BUDGET REPORT PROJECTS COUNCIL TAX RISE OF ALMOST 30 PER CENT OVER NEXT FIVE YEARS

HUGE RISE EQUIVALENT TO £370 PER YEAR FOR A BAND D PROPERTY IN ENGLAND

Buried in the small print of the Pre-Budget Report is some very worrying news for council taxpayers, who have already seen council tax almost double over the last decade:

• The Government’s projection of the increase in council tax between 2007-08 and 2008-09 can be found in Table B8.  Council tax revenue is projected to increase by 5.1 per cent, from £23.7 billion to £24.9 billion.
• Paragraph B.52 explains how “the council tax figures for 2008-09 onwards are based upon the arithmetic average of council tax increases over the past three years”.  This means that the same increase of around 5 per cent is expected in future years.
• This 5 per cent, compounded over the five years to 2013 where the public finance projections end, would add up to a 28 per cent increase in council tax revenue. 
• Average council tax on a Band D property in England in 2007-08 is £1,321.   Increasing this by 28 per cent would mean an increase of £370 a year for an average Band D bill.  This means that by 2013 an average Band D bill could reach £1,691.

Matthew Sinclair, Policy Analyst at the TaxPayers’ Alliance, said:

“These new rises will mean more pain for council taxpayers, particularly retired people who are the ones that suffer most from this unfair tax.  With no clear accountability for council tax rises it is too easy for government to blame councils and councils to blame government when big new bills land on people’s doormats.  Taxpayers need a cut in council tax not inflation-busting increases.”

Download the TaxPayers' Alliance response to the Pre-Budget Report's projections for council tax (PDF)

TaxPayers' Alliance response to the Quality of Life Policy Group

This document sets out the problems with the "Blueprint for a Green Economy:  Submission to the Shadow Cabinet" report of the Conservative Quality of Life Policy Group.

It details how the report is based upon highly suspect assumptions and proposes increased taxes, increased regulation, new quangos, a curb to vital infrastructure investment and a retreat from free-trade.

Download TaxPayers' Alliance Response:  Quality of Life Policy Group Report (PDF)

Cost of Government Day: Monday 23 July

The TPA has extended the concept of Tax Freedom Day, long championed by the Adam Smith Institute and now an established part of the political calendar (in 2007 it fell on 1 June) and can now provide an estimate of the Cost of Government Day.  This is the date in the calendar year on which the average person has earned enough gross income to pay off his or her share of government spending and regulation.

The result for 2007 is as follows:

• The average person must work for 204 days of the year to pay off his or her share of government spending and regulation.

• The Cost of Government Day in 2007 is 23 July.

The Cost of Government Day calculation is done in two parts:

1. According to the OECD, total government expenditure will be 44.9 per cent of GDP this year. This means that for 2007:

• The average person must work for 164 days of the year to pay off his or her share of government spending.

• The average person was free of the cost of government spending in 2007 on 13 June.

2. The Better Regulation Task Force (now the Better Regulation Executive), which is sponsored by the Government, has estimated that the cost of government regulation is between 10 and 12 per cent of GDP.  Taking a mid point of 11 per cent means that for 2007:

• The average person must work a further 40 days of the year to pay off his or her share of government regulation.

• The average person must work from 13 June to 23 July just to pay off the cost of government regulation.

The Cost of Government Day is an important concept to develop as it captures the hidden costs of government, which encompass far more than stealth taxes:

• Under Gordon Brown, government spending has for a number of years been higher than government receipts.  The resultant government borrowing will have to be paid off by taxpayers eventually – the future bill is being accrued this year.

• The cost of government regulation on the economy is even murkier, but it will eventually fall on taxpayers in the form of lower wages, higher prices and fewer jobs.

Cost of Government Day has been getting later in recent years and falls later in the year than in many other OECD countries:

• In 2000, the Cost of Government day fell on 26 June, almost a full month earlier than this year’s date.

• The Cost of Government Day in 17 OECD countries falls earlier than in Britain in 2007.

Download the full Cost of Government Day report (PDF)

Tax Freedom Day response

TPA response to Tax Freedom Day, which in 2007 fell on 1 June. The report compares estimates of Tax Freedom Day in other countries.

Download Tax Freedom Day response (PDF)

Poorest fifth pay the highest tax burden

This report analyses official data for the last 20 years and finds that the gap between the tax burden facing the poorest fifth and the richest fifth of households has widened under Gordon Brown. The poor pay higher taxes than the rich.

Download Poorest fifth pay the highest tax burden (PDF)

Dynamic model of the UK economy

The TPA commissioned the respected Centre for Economics and Business Research to build a dynamic model of the UK, to show how tax reductions will benefit the economy. This report explains how the model was set up and simulates a reduction in the corporation tax rate to the Irish rate of 12.5 per cent over nine years. The results are quite dramatic!

Download The dynamic impact of the 2007 Budget and a comparison with the impact of gradually introducing an Irish level of corporation tax (PDF)

Download the press release accompanying the report (PDF)

Budget 2007: tax cuts abroad

In advance of the Budget in March 2007, the TPA detailed a large number of countries abroad that had cut taxes in the past two years, putting pressure on Gordon Brown to follow suit.

Download Budget 2007: tax cuts abroad (PDF)

Who wants to be a Tax Millionaire?

...Nobody, but if current trends continue, by 2015 the average houshold will be paying £1 million in direct and indirect taxes over a lifetime.

Download Who wants to be a Tax Millionaire? (PDF)

The real cost of Gordon Brown

This report shows how, if Gordon Brown had not increased the tax burden, the basic rate of income tax could have been cut to just 10 per cent.

Download The real cost of Gordon Brown (PDF)

Flat Tax: Towards a British Model by Allister Heath

A fair income tax which taxed all income at the same percentage would dramatically improve incentives, while bureaucracy could be dispensed with almost entirely. This idea, already sweeping Eastern Europe, is the 'flat tax'.

Published by The TaxPayers' Alliance and The Stockholm Network

You can order a copy of the flat tax pamphlet by either:

• Sending a cheque for £10 to The TaxPayers' Alliance, 1 Warwick Row, London, SW1E 5ER
• Sending the TPA £10 via the PayPal button below (You do not need to create a PayPal account, simply use the first option on the page):

Or, Download Flat Tax: Towards a British Model by Allister Heath

Tax Reform Commission response note

The TaxPayers' Alliance responds to the Tax Reform Commission report.

Download Tax Reform Commission response note (PDF)

Total Lifetime Tax

How much will the average person pay in tax during their lifetime?  Find out in this TaxPayers' Alliance Research Note.

Download Total Lifetime Tax (PDF)