The Budget 2021, the highest tax burden in 70 years

The Budget 2021, the highest tax burden in 70 years

I wrote a short piece on the potential need for the EU to acquire direct taxation powers which led to me checking how much the UK government raised from income based taxes vs. VAT. The article reproduced some charts from Parliament but I was surprised to discover how low a share of government revenue it now represented. The article was written after the budget, which had not really made an impact in my consciousness; it just seemed ‘meh’ to me. It is however yet another turning of the screw in a largely successful attempt to make the working classes pay for the crisis in national income and wealth facing this country.

John Crace reviews the speech and budget in this article on the Guardian, A mini budget full of lies from Rishi Sunak, the people’s millionaire , and says,

[He can ] deliver a spring statement – AKA a seismic budget in any other year – that offers nothing to the poorest and most vulnerable members of society while sobbing on their behalf. Who can tell the chamber with a straight face that he is committed to cutting taxes even when the Office of Budget Responsibility is saying that the tax burden is set to go up to 36.3% by 2026: the highest level since the 1940s.

John Crace

I recommend you read Crace’s article in full.

It also reports on the budget, in an article by Philip Inman, their economics editor, Rishi Sunak ‘protecting Treasury from inflation at families’ expense’ | Spring statement 2022

Critics of UK chancellor’s spring statement say it prioritises debt reduction and fails to provide support to lower-income households

Philip Inman

This despite the sub-headline concentrates on the macro-economics, reflecting the argument that since the Govt has borrowed on variable interest rate bonds,  as inflation kicks in, they argue they need more money to service the debt. The article concludes by observing that inflation may fall, that soaring energy costs are a drag on prosperity, and that the real reason for increasing tax revenues is to be able to give it back in the run-up to an election.  

Despite being under pressure to minimise the effects of the cost of living crisis, driven by Brexit and energy cost inflation and help households across the country who are being forced into poverty, all the budget did was announce a cut on fuel duty, Labour are asking for a VAT cut on energy bills, although instructing Ofgem to implement a price cap would be more effective. He also raised the threshold at which people start to pay National Insurance, which is a means of alleviating the fiscal drag created by freezing the tax free allowance.  

From Inman’s article, I also note that Sunak has frozen the income tax free relief for the next four years, together with the IHT limits. The effect of this is that before, people could expect the tax free allowance to rise in accordance with inflation, giving them small amounts of extra disposable income, even if they did not get a pay rise. This has now gone. It will also have the effect of raising the share of income tax paid by the low paid.

He also, in contradiction, to the Tories election promise suspended the pension link with earnings for 2022/23 although he claims to be willing to reintroduce it next year. He has also cut the amount the poorest in our society get by clawing back the uplift paid in 2019-2021.

My segue into this piece was the low proportion of government income attributed to Income Tax vs VAT. The House of Commons Library  produced a report called, Tax Statistics: an overview, and my previous article reproduces some charts from it while making the point that treating NI as separate category minimises the impact of employee contributions, which are levied at 12% until one begins to pay higher rate tax and allows Income Tax to be described as more progressive than it is. NIC’s also are paid by employer’s and so clarity on corporate contribution to the exchequer is also reduced.

Chart, line chart

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from the HoC Library Report : Open Parliament Licence v3.0.

VAT is 20%, for the less well paid more than they pay from Income Tax. This needs to be rebalanced.

I finish with Statista’s charting of the Gini Coefficient over time., which measures the level of income inequality in our society,

Chart, line chart

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Statista UK Gini Coefficient over time , used under Statista Terms of Use

We have the lowest social security net in Europe, the lowest pensions and amongst the most strongly regulated Unions. Something’s got to give. …

Govt money

Govt money

I was considering the EU’s NextGenerationEU and the idea that this was the tipping point into a fiscal union. I am not sure because the EU’s tax raising powers are as pre 16th Amendment United States; it cannot tax people or companies. This led me to consider the proportion of Govt. income rasied through income tax and other sources. This is a blog in two part, the first on the EU & the 16th amendment, the second on UK income tax and income equality. I comment on direct taxes and and the 16th by writing the following,

While looking at EU common tax policy, I thought about the need of the US to pass a constitutional amendment to allow federal direct taxation since previously the US required direct taxes to be apportioned to the States. The amendment is the 16th, and was designed to permit Income Tax an overcome a Supreme Court ruling which prohibited it; which came in two years later and has never been repealed. The Constitution Center has a review of the amendment arguing that the 16th only authorises income tax and the court has for instance constrained capital gains taxes. The Atlantic, also comments although the latter is more a history.

Dave Levy

The obvious development of income tax within the US led me to have a look at just how much of the UK Govt’s income is raised through income tax, the most progressive tax we have. The House of Commons Library has described the 2020/21 tax revenue sources, it seems that they’re no longer posting it out to everyone.

from the HoC Library Report : Open Parliament Licence v3.0.

The report landing page also has a chart showing the proportion by source over time, and its remarkably consistent. I also note that Income Tax is separated from NI and while some NI is paid by the employer most is paid by the employee. The Govt gets 43% of its income from these two sources and on top of this charges 20% of what one spends. There is also a compulsory private sector pensions levy on workers too, which does not appear in this chart. No wonder the low paid are struggling.

made by Dave Levy, from the HoC Library Report : Open Parliament Licence v3.0.

The separation of NI from Income Tax also permits them to claim that “The 10% of income taxpayers with the largest incomes contribute over 60% of income tax receipts”.

If you want to look at income inequality, Statista have the Gini Coefficient over time.

Statista UK Gini Coefficient over time , used under Statista Terms of Use

We need more income tax, less NI & VAT


This article contains Parliamentary information licensed under the Open Parliament Licence v3.0. The featured image is from Images of Money, on flickr, via wikimedia.org and used under the Creative Commons Attribution 2.0 Generic licence.  …

The economics hurdle for rejoining!

This was published on the London 4 Europe web site, arguing that the Euro and “Banking Union” are potential political obstacles to rejoining. I just observe that the author has not caught up with the change in macro-economic management, the Stability and Growth Pact has serious credibility problems given the numerous breaches. We can hope that with a new coloured government in Germany the deficit fetishism of the EU will be weakened. Secondly, banking regulation is global and emanates from the G7 and BIS in Basel. The EU has little room for manoeuvre, although of course, should it be in a position to join BIS that would change things. This is an article designed to show how clever the author is and fails in that goal.

The ECB, Frankfurt CC DFL 2011 BY-SA

I note the article focuses on Sweden, which has agreed to adopt the Euro and not Denmark which has an opt-out. When we get to negotiating re-entry, the size of the UK economy and the sterling zone will be issues which may lead to us being given an opt-out or a Swedish deal, although I was interested to note that Nordea, Sweden’s largest bank has moved to Finland to locate in the Eurozone.

A serious analysis will come later, when both parties need an answer dealing with transaction volume, prudential regulation and fundamentally macro-economic policy. Let’s note that we had an opt-out of the compliance clauses of the SGP, we doubt we’ll be getting that back.

Macro-economics will be a problem if we have a left led Labour Govt., that wanted to pursue a policy of full employment but more importantly will be the need to meet the democracy criterion of the Copenhagen Criteria, where parliamentary sovereignty, the House of Lords and first past the post together may be seen as obstacles. Starmer’s Labour lacks the will to confront the issue of rejoining the EU but would probably welcome the shackles of today’s Stability and Growth pact. Actually, the Stability & Growth Pact is a serious barrier to rejoining for the Left; perhaps the sterling zone will save us from that too.  …

Software Piracy and supply

Software Piracy and supply

This is interesting. From the Register, an article called, “Software piracy pushes companies to be more competitive, study claims • The Register“, sub-titled, irreverently as ever, “So, do copy that floppy?”

The article is written by, Wendy Bradley, assistant professor of strategy, entrepreneurship, and business economics at Southern Methodist University’s Cox School of Business, and Julian Kolev, an economist at the United States Patent and Trademark Office. The article describes their methodology, and links to their paper. They define the launching of Bittorent as a shock and examine the intellectual property development of vulnerable companies to that shock.

“When comparing the IP strategies of software firms at risk of piracy (the treatment group) against those of not-at-risk firms (the control group), we find that our treatment group significantly increases its innovative activity after the piracy shock in terms of R&D expenditures and granted copyright, trademark, and patent applications,”

Bradley & Kolev – Software Piracy and IP Management Practices: Strategic Responses to Product-Market Imitation (August 2021)

Interestingly it seems, that Entertainment software companies behave differently. although the academic work done, as quoted in the article does not suggest that piracy reduces the supply of content.

Basically the big software firms use their superior cost structures, achieved by size and source code ownership to increase the rate of innovation to keep their customers coming to them. The entertainment companies don’t. I don’t think they look at the size and cost of investment into regulatory barriers to entry, both buying the laws they want, and pursuing newly created malefactors.


Bradley, Wendy and Kolev, Julian, Software Piracy and IP Management Practices: Strategic Responses to Product-Market Imitation (August 2021). USPTO Economic Working Paper No. 2021-3, Available at SSRN: https://ssrn.com/abstract=3912074 or http://dx.doi.org/10.2139/ssrn.3912074 …

Fair Pay!

Fair Pay!

The press are full of stories about Google looking to reduce the pay of those who continue to work from home as the public health restrictions are lifted. This is unjust; if there’s one lesson learnt during the pandemic it’s that essential workers are under paid, but the idea of the world’s most profitable companies trying to restore/boost their profitability by reducing the wages of their workers is, while not unexpected, pretty appalling. In the UK, this may open an employer to equal pay suits.

Google claims to be a global talent company and it would surprise me if they don’t pay the market rate for the job wherever! I know that Sun Microsystems, in its last few years came to the view that the talent market was global and set up HQ offices around the world with Labs in Grenoble and St. Petersburg and a location in India. It bit them the arse when they came to close the offices, French redundancy consultation laws are a bitch … we could do with some laws like that. (In fact a game I played with my US managers and peers, was asking which country in Europe is it hardest to fire people in, and they all thought it was Germany. The answer was in fact Italy, where the comrades went on unofficial strike. Germany was 4th, after Italy, France and the Netherlands.)

Marxists argue that employers will seek to pay the minimum wage with crudely speaking a floor of the replacement cost of the labour; they also argue that all the value is created by the labour and that it’s the appropriation of surplus value is the driver of the class struggle. Classicists argue that now that labour has transformed from animal effort, there is a supply and demand for skills and experience and there is an equilibrium grate of wages. I suppose the cost to commute vs the born cost of provisioning the workplace are factors in determining replacement cost and/or the supply curve, but they are also part of a 21st century trend of dumping cost elsewhere. Let’s note that when employees work from home, Management save the cost of office space.  Here the employer is seeking to reduce wages by clawing back the employee’s travel to work costs and also make savings by reducing its office costs.

You need a Union, see also Less money for working from home? at GMB London General X58 Branch …

Community creates value

Community creates value

Cory Doctorow comments on Games Workshop’s latest legal initiative against its fans, I chose some quotes from the article, including the allegation that they behave like sociopaths and created their IP in exactly the way they're pursuing others for. I conclude with, the probably not original statement, "Open source campaigners have always argued that community creates value, here's another battleground where it will be tested.".

The Northern Ireland Protocol

The Northern Ireland Protocol

I was originally going to write something which I hope might be profound or provoking, but in the end, this just noted more of the Govt's myopia. Northern Ireland Protocol was agreed to avoid border infrastructure on the island of Ireland. The UK Govt agreed ... Boris and the DUP blew up May's previous solution to the problem , which was to belong to the Customs Union while working out something better. I look at the 'command' paper, which is an attempt to renegotiate the Northern Ireland Protocol, part of the Withdrawal Agreement which left Northern Ireland in the EU’s customs area for the purposes of intra-Ireland trade. It looks at the EU's response. ...

Meals Ready to Eat. Not!

Meals Ready to Eat. Not!

Reuters reports on a meeting between food distribution industry representatives and DEFRA. Using the Army was only one idea expressed, and it’s an indicator of the com9ing food shortage crisis created by Priti Patel & Boris Johnson’s “controlled border” policy and Brexit. One of the massive labour shortages at the moment is HGV drivers, and we can’t get the food to the supermarkets, even if we can pick it from the fields. The problem is compounded by the relatively low wages paid these people . UK PLC is failing because its low wage economy cannot get people to work for it any more.

from team voyas, via unsplash

My evidence for the coming crisis is that. in Tesco’s yesterday, there was no cabbage. and the garlic came from China. (I have grown garlic in my garden in previous years, so there is a food miles carbon cost thing here too..) …