Britain's Pre-Budget Statement Due Tomorrow

by Jason Gorringe, Tax-News.com, London

26 November 2001

As UK Chancellor Gordon Brown prepares for his pre-budget statement tomorrow, new figures released yesterday by PricewaterhouseCoopers suggest that the tax burden in Britain now exceeds that in Germany.

According to the calculations by PricewaterhouseCoopers, taxes represented 37.7 per cent of Germany's GDP in 1999, compared with 37.4 per cent in Britain. But it projects figures of 36.2 per cent for Germany this year and 37.8 per cent for Britain. Britain's tax burden is moving slightly upwards, while the figures show that it is falling in most EU countries.

Gordon Brown is intending to call for a national debate tomorrow on how Britain will meet the rising cost of the National Health Service and other public sector sacred cows, although he will rule out immediate tax rises during the current downturn. In the pre-budget statement, the Chancellor will cut previous forecasts for economic growth, but insist that any shortfall can be made up by extra borrowing rather than higher taxation.

Michael Howard, the shadow Chancellor, said: "Labour is increasing the tax burden on individuals while hitting businesses with a stream of new taxes, red tape and regulations. The tax advantage we used to enjoy against our European neighbours is being eroded."

A Labour spokesman said the statistics ignored other European governments' reliance on revenues from sources other than tax. "The tax burden is falling, not rising, and it's lower than it would have been under the Tories' plans," the spokesman said.

Any forecast for slower growth made on Tuesday may however overstate the problem for Government. The weakness of government spending may mean this year's fiscal surplus is larger than forecast, making additional spending pledges easily affordable. Economists are pencilling in a likely surplus of £10bn this year, against a forecast in March's budget of £6bn. Some of the underspent health and education money may be used to attract headlines by being allocated to new programmes.

Whatever the Chancellor says on Tuesday, one sure result is further growth in the already massive body of tax legislation and commentary. Tolley's UK Tax Guides, which explain tax legislation to practitioners, now weigh in at 3,414 pages, having added a total of 885 pages and reduced type sizes since Gordon Brown began to fiddle with tax schemes six years ago.

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