Farewell to the 'tax-cutting Chancellor' who wasn't what he claimed to be

The tax burden increased more under Rishi Sunak than any other Chancellor since the 1970s, new figures show.

Since Boris Johnson's landslide 2019 election victory, taxes have risen to 35.5pc of GDP, up from 33pc under his predecessor Theresa May – the biggest increase under any leader since the 1970s. The last time the tax burden rose as much was during the first administration of Harold Wilson.

That is without including Mr Sunak’s windfall tax on North Sea oil and gas producers, announced in May, and despite his increase in National Insurance thresholds which came into effect this week – previously hailed as the “tax cut of the decade”.

By the end of this Parliament, policies implemented by Mr Sunak mean the tax burden is on track to reach its highest since 1949, according to research from the Taxpayers’ Alliance lobby group.

Critics said Mr Sunak had failed to live up to the tax-cutting stance adopted by his political hero Nigel Lawson.

Danielle Boxall, of the Taxpayers’ Alliance, said: “While Rishi claimed to be a tax-cutting chancellor, taxes remain the single biggest bill families and firms face.”

The higher-earning middle-class has suffered the most. Analysis from the Centre for Policy Studies think tank showed the average worker on just under £32,000 is around £55 better off a year due to reforms under the outgoing Chancellor. Those on half the average national income – £16,000 – are £255 better off, while those on £64,000 are worse off by almost £600.

Tom Clougherty, of the CPS, said Mr Sunak – who quit Boris Johnson’s Government on Tuesday night – would be remembered for the support he provided to struggling families during the pandemic, but also for increasing taxes for the middle-classes.

He said poor families had benefited from changes to Universal Credit and National Insurance thresholds, but middle and higher earners had been hit with higher tax rates and freezes to their tax breaks.

He said: “Low earners have certainly benefited from his reforms. But you can also see why there was so much disquiet on Tory backbenchers about the Government's tax policy – raising taxes for employers and higher earners isn't exactly Conservative orthodoxy.”

Sajid Javid, who resigned on Tuesday from his post as Health Secretary, was also briefly Chancellor under Boris Johnson. However, he quit before he was able to deliver his first Budget.

During his time in office, Mr Sunak promised to cut the basic rate of income tax by 1p from 2024 and raised the point at which National Insurance is payable to £12,570, from £9,880. He also implemented emergency tax cuts for business hit during the pandemic, including cutting VAT and introducing a business rates amnesty. His furlough scheme and help for the self-employed was also accompanied by a stamp duty holiday for property buyers.

However, his tax cuts were outweighed by his tax rises. These included increasing corporation tax to 25pc from 19pc, as of 2023; raising the rate of National Insurance and dividend taxes by 1.25 percentage points; a windfall tax on North Sea oil; and freezing income tax thresholds for five years in a stealth tax raid that is forecast to raise £20bn by 2026. All other personal tax allowances were frozen.

He repeatedly professed he was a “tax-cutting” Chancellor, claiming Margaret Thatcher’s Chancellor Nigel Lawson as his political hero – even hanging a picture of the radical reformer in his 11 Downing Street office.

A key architect in Thatcher’s economic strategy, Lawson argued lower taxes attracted investment and boosted the economy. He attempted to abolish a tax in almost every one of his Budgets and radically simplified the income tax system by cutting the number of tax bands from six to two and slashing the top rate of tax from 60pc to 40pc.

As Mr Sunak makes way for his replacement, the former education minister Nadhim Zahawi, he will regret he was not able to do more to emulate his idol, Mr Clougherty said.

“Clearly he has not come anywhere close at all to what Lawson achieved.

“He wanted to be a tax-cutting Chancellor, but his biggest regret will be that he never got to deliver the good news he promised before the next general election,” he said.