Taxes are set to hit their “highest ever level” despite Jeremy Hunt’s boasts that he has handed out the biggest package of tax cuts since the 1980s.
In his Autumn Statement on Wednesday the chancellor announced National Insurance will be cut by 2% from January 6.
He also made the policy which allows businesses to deduct the full cost of investing in equipment from their tax bill permanent.
But in its analysis of the plans, the Institute for Fiscal (IFS) studies said these headline measures did not make up for the overall increase in taxes.
“The projected tax burden is still set to reach 37.7 per cent of GDP by the end of the forecast period: its highest ever level in the UK,” the think-tank’s director Paul Johnson said on Thursday.
"The tax cuts are paid for by planned real cuts in public service spending."
Johnson said the cut in National Insurance “pales into relative insignificance” when compared to the increase in personal taxes caused by the freeze in income tax thresholds.
Previously as people’s wages increased each year the thresholds at which they paid various levels of tax also went up.
But these thresholds have been frozen until 2028, meaning more and more people are being pulled into the higher bracket and pay more tax, an impact known as “fiscal drag”.
In his statement yesterday, Hunt told MPs he was delivering the “largest ever cut to employee and self-employed National Insurance and the biggest package of tax cuts to be implemented since the 1980s”.
Defending the overall rising tax burden this morning, the chancellor told BBC Radio 4′s Today programme that “taxes have had to go up so we can pay down those Covid debts”.
“But yesterday I did make a start in bringing down the tax burden,” he said.
“I’ve never said we were going to get there in one go, but it was very sigfinicant that for the first time, because the economy is stronger than people predicted, we were able to make a start.”