TaxPersonal TaxLies, damn lies and statistics…

Lies, damn lies and statistics...

'The tax burden peaked under the 1974/79 Labour government, fell under Lady Thatcher and is now set to go back to its previous late seventies peaks.' This apparently plausible statement suffers from only one drawback: it is completely wrong.

The tax burden is best expressed by the tax/GDP ratio, that is, the proportion of GDP taken in tax.

An analysis of Treasury figures shows the tax/GDP ratio averaged 35.5% during the 1974/79 Labour government (peaking at 36.8%) and averaged 37.1% under Lady Thatcher (peaking at 38.9%).

Between 1978/79 (the last year of the 1974/79 Labour government) and 1990/91 (the last year of Lady Thatcher’s government), the tax/GDP ratio jumped from 33.3% to 36.3%, a rise broadly equivalent to 10p on the basic rate of income tax.

The tax burden thus rose decisively under Lady Thatcher (both on average and in absolute terms), compared with the previous Labour government.

Turning to the current position, then in terms of Treasury forecasts, the tax/GDP ratio during Labour’s second term is set to average 36.9% assuming a full five-year term – slightly lower than the average under Lady Thatcher.

  • Maurice Fitzpatrick is Numerica’s head of economics.

Related Articles

Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

Personal Tax Inheritance tax is 'unfit for modern society' and should be abolished, says think tank

3w Alia Shoaib, Reporter
Rent-a-room relief – the survey says…

Personal Tax Rent-a-room relief – the survey says…

2m Helen Thornley, ATT Technical Officer
What should the OTS prioritise in its review of inheritance tax?

Personal Tax What should the OTS prioritise in its review of inheritance tax?

4m Alia Shoaib, Reporter
LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5m Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

6m Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

7m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

8m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

9m Alia Shoaib, Reporter