06 August 2008

The Myth Of Rising Taxes Under Labour

Snowflake5 has an excellent post up at LabourHome pointing out the many tax cuts of this Labour government.

I would go further, as I demonstrated with this post in December 2005, and include the fall in...
overall taxation and the national debt and lower increases in duties on fuel, alcohol and cigarettes of this Labour government compared to the previous Tories. Here is what I wrote in 2005 - it pretty much all stands the test of time:-

All that matters about tax is the following.

1. The overall tax burden.
2. How it is raised and who has to pay it.
3. What it is used for.

This year (2005) the tax burden is 38.3% of GDP.
The average tax burden since 1997 is 38.4% of GDP.
The average under the Tories from 1979 to 1997 was 40.6% of GDP

Looking at international comparisons our low tax burden is even more stark.

France and Germany have tax burdens of 48% and 44% respectively. They consequently can afford to fund their public services properly.

Virtually every country in Europe has a higher tax burden than us.

This is a quote from the Bruges group (right wing Tory MPs). Even they admit the UK's tax rate is low!

"the UK is quite competitive in Europe with a lower than average tax rate"

Over the last 35 years the tax burden has varied between 36% and 48% of GDP. So we are at historically and internationally low levels of tax.

We hear a lot about Labour tax rises, but here is where Labour have cut taxes;

Labour tax cuts for the individual since 1997.

Income Tax basic rate REDUCED to 22% (now 20%)
VAT on utility Bills REDUCED from 8% to 5%
A Couple with 2 children pay NO net tax until earnings reach £21,000
Pensioners between £1,500 and £2,000 better off

Labour tax cuts for business since 1997

Corporation Tax REDUCED to 30%
(USA 39%, Germany 40%, France 35%)

Small Business rate REDUCED from 23% to 0%

Labour have SUBSTANTIALLY REDUCED the increase in fuel duty.

(over 8 year periods)
TORY 1989-1997 17.7 to 40.3 (128% increase)
LABOUR 1997-2005 40.3 to 50.2 (25% increase)

DIESEL DUTY(Pence per litre)
TORY 1989-1997 17.3 to 40.3 (133% increase)
LABOUR 1997-2005 40.3 to 53.3 (32% increase)

Labour have even SUBSTANTIALLY REDUCED the increase in alcohol duty.

BEER DUTY (Pence per pint)
TORY 1989-1997 18.9 to 24.7 (31% increase)
LABOUR 1997-2005 24.7 to 27.9 (13% increase)

WINE DUTY (Pence per 75cl)
TORY 1989-1997 77 to 109 (42% increase)
LABOUR 1997-2005 109 to 123 (13% increase)

SPIRITS DUTY (Pence per 70cl)
TORY 1989-1997 442 to 548 (24% increase)
LABOUR 1997-2005 548 to 548 (NO increase)

IFS excise info

All this but what has happened to borrowing?

National Debt has been REDUCED from 44% of GDP to 32% of GDP.
Source: Institute For Fiscal Studies (pdf)
The Tories only cut taxes for those earning over £40,000 and paying large amounts of top rate of tax, but increased taxes for everyone else. They also shifted expenditure from the NHS and education and spent it on unemployment and the defence budget. The Tories also increased the national debt. It was a double whammy for the poorest - which is why the Tories tripled inequality and poverty when in power. Labour have redistributed over £100bn to the poorest 20%, without this redistribution, poverty would have continued to explode.


  1. Indeed, this is a great post.

  2. It's a crap post! He's scraping the barrel with this post.

    What about the extension of National Insurance?

    If stamp duty thresholds have been increased, why is so much more stamp duty being paid now rather than in 1997?

    All small businesses pay VAT, it's just a question of whether they can reclaim it or not.

    Dividend tax credits were scrapped on pensions.

    Anyone heard of council tax?

    Even speeding fines have been increased!

  3. Snafu: Council Tax is a Tory Tax that admittedly Labour should have scrapped by now (or at least made more fair by widening the bands).

    The reason pensions have gone belly up is because of unregulated capitalism gone mad - blame the bankers and speculators that Thatcher set free in the 1980s. Of the money lost on pensions the stock market crunch makes up 95%.

    As for speeding fines - that is voluntary - if you don't want to pay it, simply don't break the speed limit. Why is it you right-wingers come down hard on any other type of law breaking but oppose a law being enforced that saves lives?

    The NI increase was 1% - more than made up for with the 3% cut in income tax.

    House prices have rocketed so stamp duty revenues have rose - house-holders have made a fortune, stamp duty is only a small fraction of this.

    As for business VAT, at least small businesses can now claim it back ,under the Tories they couldn't.

  4. This post just goes to prove to me that Labour definitely don't have the balls to do things right when it comes to tax. Why is it decreasing (supposedly) for a start, and why have most recent tax changes been disproportionately weighted to the poor? If we need to pay for more services like police and education then why is it the poorest that are being made to pay for it while we get tax cuts?

  5. Lee, to be absolutely fair, when the recession is at its peak next year, the Labour overall tax take might be a percentage point or two higher than during the Tory years i.e next to no difference.

    But new Labour have, despite their best efforts to conceal it, actually been one of the most redistributive governments ever. But because they started from such a poor place with inequality taking off from the Thatcher years, it has not looked very impressive. And yes, the super-rich have escaped Labour's wrath - the redistribution has been from the 50th/90th percentiles down to the poorest 20 percentiles with those inbetween largely unchanged and the top 10 percentiles left unchecked by their extra earning power because of the weakness of the unions.nrrru

  6. When the term 'substantially reduced the increase' or any other like term in this article is used, it still doesn't conceal the fact that it is infact an increase not only in absolute terms, but in terms of percentage as well. I wouldn't expect the increase to be as high as during the last conservative government as we have recently just enjoyed our largest period of economical growth compared with one of the largest down turns in the economy in the 20th century.

  7. Anon: Come on, the national debt, fuel and alcohol duties went up 3 times faster under the Tories and overall tax including income tax and VAT was higher - is that a better way to put it?

    While Labour should get no credit for the cheap Chinese imports, credit and housing bubble and immigration that fuelled economic growth - nether should the Tories get any credit for it either. The fact remains that the Tories presided over 2 massive recessions and Labour presided over the longest period of growth on record. On top of all that, the Tories tripled poverty, brought public services to their knees and crippled people with 15% interest rates. It doesn't matter how you spin that - the Tories were a disaster.

  8. Yes indeed the tories were a disaster, I completely agree with you there and I think I might just know the name of the culprit. My point is, no matter how you put it, it's still an increase, albeit a smaller one. The tories were dreadful during their term in office, doesn't make the current government saints though. In absolute terms any increase is understandable, but a percentage increase (for example pence from a pound) is quite hard to justify as a good thing in the current economic climate. You can put it any way you like, I do understand what your trying to say, and I'm telling you it is not anything to boast about.

  9. Anon: As far as I can remember, fuel duty has been frozen this last two years.

  10. Actually duty on fuel in the U.K. rose by 2 pence per litre on unleaded and diesel fuels and by an even greater amount for LPG and natural gas. This was effective from October the 1st 2007, 10 months ago. This was the rise which pushed petrol up to the £1 per litre mark.

  11. Ok, 2p in two years. That is hardly the reason for it moving from 95p a litre to £1.20 is it?

    If you want to blame someone blame the speculators or China and India's economic growth not the government.

  12. So we should blame China and India for wanting a stable economy that will be competetive in the western markets? How about this, I'll blame the speculators, and the government. And it is a reason for the cost of unleaded rising from 95p to 116p per litre (the current mean cost of unleaded per litre as of August 3th 2008), not THE reason, but it is a reason.

  13. 2p out of 21p - I suppose you could say it is 10% the govt's fault!

  14. Slightly more than that probably as the VAT is taken from the cost of the petrol + the duty on it rather than just the cost of the petrol, so it is infact a compound tax rate on an existing tax, the increase in fuel duty has a knock on effect on the VAT. As for the rest of the increase, that is just criminal with regards to BP and shells annual reports for example. I suppose if alternative fuels were readily available and practical then it might be more acceptable. But they're not, and 10% of the increase is a lot considering how much tax motorists were already paying before the rise per litre.

  15. when the recession is at its peak next year, the Labour overall tax take might be a percentage point or two higher than during the Tory years i.e next to no difference.

    1 percent of average earnings is about £250 per year, or £500 for two. The difference is likely to be 'just' 3 or 4.

    i.e next to quite some difference.

    Council taxes have doubled under Labour.

    As for fuel duty, this government doubled the escalator take in 97 to six percent over inflation and had to scrap it (by holding position there) after the fuel protests. Since then they upped the tax take a couple of times a year and the only reason they have 'delayed' this years rise is they don't want another mass protest, especially so close to the election run-in.

    The simple fact is that we pay more taxes per head than at any point in history and there will come a time when people reject this.

    Locking up pensioners for not paying their council taxes (Prescott on the beeb saying to a woman in her seventies 'Margaret you must pay your council tax' a particular low point) is a recent phenonemon, and I hope you have the decency to not hide behind 'it's a Tory tax' on this one.

    The set rate for the BBC tax has increased by over 40%, have your wages in the same period?