Tony Byrne’s View 26th June 2017
With the recent Budget fresh in people’s minds and the media’s obsession with each party’s manifesto promises from the recent General Election the inexorable rise in taxation continues each year.
Because both Tory and Labour governments have been clever at introducing endless stealth taxes and increasing complexity into the taxation system, the sheer amount of the rise in taxation has not been truly appreciated by the average taxpayer. Did you know for example that indirect taxation now accounts for 42% of all taxes raised annually? That’s more than is raised in Income Tax!
Based on the news that I watch on TV and listen to on the radio I remain convinced that most people do not know what the deficit and the national debt is. In fact many people think it is one and the same thing!
The one thing governments never do is to spell out to the electorate exactly what these phrases mean. Basically the deficit is the amount of the government’s spending in excess of its income annually. The UK government’s tax revenue was £730 billion in the fiscal year to 5 April 2017. The Budget deficit rose to £103 billion in 2010 under the then Labour government but has subsequently been reduced to £15 billion in 2017 under a Conservative government or coalition with the Liberal Democrats. So even with the deficit reduced to £15 billion a year the fact remains that the government continues to spend more than it earns which means that the national debt continues to rise.
National debt is the total amount the government owes. By the end of December 2016 it had risen to £1.73 trillion! However, that is only half of the story. If you add in unofficial debt such as state and public sector pensions commitments, private finance initiatives, mortgage securities etc. The real level of national debt is much, much higher.
So whatever your political persuasion, the fact remains that in order to eliminate the deficit and reduce national debt the government has to increase taxes, reduce public spending and grow the economy. Ideally a combination of all 3. The debt has to be paid off one day.
So it is all very well for Jeremy Corbyn to continually call for more public expenditure but the country simply cannot afford it! Labour’s proposal to borrow £500 billion is sheer folly. We cannot afford to get into any more debt! Period. The UK economy is already the 6th most indebted of the advanced economies of the world. A country must spend less than it earns otherwise the long term consequence is greater poverty for all. This applies to whichever party is in power.
The problem with spending more than you earn is that you eventually become bankrupt. That is exactly what has happened in Greece. Its citizens are now suffering from extreme austerity. In fact all of the EU Mediterranean countries are suffering from high unemployment and low economic growth. Both France and Italy are following suit. Both economies are forecast to go bust due to their inability to pay off their debts which will be the death knell for the euro and will, in my opinion, cause the destruction of the EU. The problem with Italy’s and France’s economies failing is that their economies are too large to bail out unlike Greece’s. So as far as I am concerned the UK is simply deserting a sinking EU ship by voting for Brexit. We will not be called upon to bail out these spendthrift countries.
The problem with an increasing debt burden is that one day the debt has to be paid off and the way things stand it will be our children and grandchildren who will be lumbered with the liability long after we have retired and passed away.
So what is the relevance of all of this to you the taxpayer? Well you can expect taxes to continue to rise especially stealth taxes. So it is important to ensure you invest your money as tax efficiently as possible by taking advantage of all of the tax breaks available in the UK today.
Why not contact us to get an up to date tax review or forward this blog to someone you know who could benefit from our advice? You know it makes sense.