Rachel Reeves admitted her Budget will be ‘painful’ today amid fears it will leave Brits facing the highest tax burden since the Second World War – and potentially ever.
The Chancellor argued problems cannot be ‘magicked away’ as she prepares to mount an eye-watering raid next Wednesday with warnings that she needs to close a £40billion black hole in the government’s books.
But the rumoured £35billion of tax increases in the package could leave Ms Reeves with two unwanted slices of history.
Official figures suggest it would be the most tax raised at a Budget since 1993, in the aftermath of the Black Wednesday Sterling crisis.
And Ms Reeves could put the country on track to pay the highest tax as a proportion of GDP since comparable records began nearly eight decades ago.
The increase would be equivalent to around 1.2 per cent of GDP. Adding that to the existing forecasts for the tax burden suggests that it will be over the previous peak of 37.2 per cent in 1948.
The National Accounts measure of tax as a proportion of GDP was not produced prior to that.
However, longer-term stats compiled by the Bank of England indicate that taxes are likely to have been lower all the way back to 1700.
Speaking to presenter Matt Chorley on BBC Radio 5 Live, Ms Reeves again blamed the Tories for mismanaging the public finances.
She stressed that the main rates of income tax, VAT and national insurance will not change – although the government is set to target employers’ NICs.
‘You can’t just sort of pretend that the sort of fiscal position that we’ve inherited is all fine and there won’t be any pain in fixing it,’ she said.
‘Of course it’s going to be a challenge. Of course it’s going to be a challenge next week.
‘I was really clear about that in July… that at the budget, there will be more difficult decisions to come on spending on welfare and taxation, and I’m not going to pretend otherwise.
‘I’m not going to say that all of those problems can just be magicked away.’
There have been signs of growing anxiety within government over how extra cash can be found from already-struggling Britons.
Rumours have been circulating that manifesto measures such as imposing VAT on private school fees and cracking down on non-doms will not bring in as much as hoped.
And Labour has ruled out changes to headline income tax, VAT and national insurance rates – although employers NICs looks highly likely to be raided.
Capital gains, inheritance tax, pension pot withdrawals and fuel duty are among the other areas in the crosshairs.
Meanwhile, has emerged that Ms Reeves is likely to extend the freeze on tax thresholds beyond the current end date of 2028.
The IFS think-tank has estimated that the move will bring 600,000 more people into the higher and additional rates of tax by 2029.
That would mean numbers paying the 40p rate – which applies on earnings between roughly £50,000 and £125,000 – topping 3million for the first time.