{"id":3095,"date":"2010-10-19T12:24:29","date_gmt":"2010-10-19T12:24:29","guid":{"rendered":"https:\/\/mmm.9dotdigital.ca\/?p=3095"},"modified":"2025-03-27T15:49:08","modified_gmt":"2025-03-27T15:49:08","slug":"uk-fiscal-consolidation-too-reliant-on-front-loaded-tax-hikes","status":"publish","type":"post","link":"https:\/\/mmm.9dotdigital.ca\/?p=3095","title":{"rendered":"UK fiscal consolidation too reliant on front-loaded tax hikes"},"content":{"rendered":"<p>The expenditure cuts to be spelt out in tomorrow&#8217;s Spending Review will be criticised for endangering the economic recovery. In reality, coming tax increases pose a much greater threat to growth next year.<\/p>\n<p>The Treasury claims that 77% of planned fiscal consolidation between 2009-10 and 2015-16 will occur via expenditure restraint rather than higher taxes. The proportion, however, is lower in the early years &ndash; only 57% by 2011-12. This is because spending cuts are being phased in while tax rises are front-loaded.<\/p>\n<p>The Treasury&#8217;s estimate of the split, moreover, may be questioned. Expressed at constant (i.e. 2011-12) prices, total managed expenditure is projected to fall by just &pound;2 billion between 2009-10 and 2011-12 versus a &pound;45 billion increase in current receipts&nbsp; &ndash; see chart. This suggests that taxes will bear 96% of the burden of adjustment by 2011-12 rather than the 43% claimed by the Treasury.<\/p>\n<p>Tax increases announced by either the coalition or the previous Labour government (since the 2008 Pre-Budget Report), with estimates of the 2011-12 yield in brackets, include:<\/p>\n<ul>\n<li>\n<p>Rise in national insurance rates offset by higher thresholds \/ new business relief from April 2011 (&pound;2.6 billion)<\/p>\n<\/li>\n<li>\n<p>Restrictions on pensions tax relief from April 2011 (&pound;0.6 billion based on previous government&#8217;s proposals, rising to &pound;4.0 billion in 2012-13)<\/p>\n<\/li>\n<li>\n<p>Rise in main VAT rate to 20% from January 2011 (&pound;12.1 billion)<\/p>\n<\/li>\n<li>\n<p>Rise in insurance premium tax from January 2011 (&pound;0.5 billion)<\/p>\n<\/li>\n<li>\n<p>Bank levy from January 2011 (&pound;1.2 billion)<\/p>\n<\/li>\n<li>\n<p>Rise in higher-rate capital gains tax to 28% from June 2010 (&pound;0.7 billion)<\/p>\n<\/li>\n<li>\n<p>Additional 50% higher income tax rate from April 2010 (&pound;3.1 billion, up from &pound;1.3 billion in 2010-11)<\/p>\n<\/li>\n<li>\n<p>Withdrawal of personal allowance from &pound;100,000 from April 2010 (&pound;1.5 billion, up from &pound;0.9 billion in 2010-11)<\/p>\n<\/li>\n<\/ul>\n<p>These increases dwarf the planned &pound;1,000 rise in the personal allowance (costing &pound;3.5 billion in 2011-12) and a phased reduction in corporation tax (&pound;0.4 billion, rising to &pound;1.2 billion in 2012-13).\ufeff<\/p>\n<p><span class=\"full-image-block ssNonEditable\"><span><img decoding=\"async\" src=\"\/storage\/graphs\/uk-pub-spending191010v2.gif?__SQUARESPACE_CACHEVERSION=1287498928614\" alt=\"\" \/><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The expenditure cuts to be spelt out in tomorrow&#8217;s Spending Review will be criticised for endangering the economic recovery. In reality, coming tax increases pose a much greater threat to growth next year. The Treasury claims that 77% of planned fiscal consolidation between 2009-10 and 2015-16 will occur via expenditure restraint rather than higher taxes. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3],"tags":[],"class_list":["post-3095","post","type-post","status-publish","format-standard","hentry","category-money-moves-markets"],"_links":{"self":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3095","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3095"}],"version-history":[{"count":1,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3095\/revisions"}],"predecessor-version":[{"id":5404,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=\/wp\/v2\/posts\/3095\/revisions\/5404"}],"wp:attachment":[{"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3095"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3095"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mmm.9dotdigital.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3095"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}