Taxes to rise £100bn amid migrant surge

RISHI SUNAK’S raid on workers and businesses will cost the country an extra £100 billion in taxes by the end of the decade as rising net migration piles pressure on public services, the Institute for Fiscal Studies (IFS) has warned.

The think tank said Britain’s tax burden would rapidly increase by 2030 as frozen thresholds and inflation pushed more people into higher brackets and corporation tax weighed on businesses. This is despite the tax cuts in the Autumn Statement. Britain would pay an extra £66billion in taxes this year compared with pre-covid estimates, the IFS said. By 2028, the increase would be equivalent to £104billion. The think tank said the rising burden was the result of a conscious decision by the Prime Minister to increase the size of the state. It comes as Jeremy Hunt, the Chancellor, prepares to deliver what could be the last Budget before the election. The IFS said continuing the tax raid would increase the tax burden from 33 per cent of GDP before Covid to a record 37.7 per cent by the end of the decade. Mr Hunt has frozen income tax thresholds for six years and increased corporation tax from 19 per cent to 25 per cent. He is reportedly considering next week’s Budget to cut National Insurance and vape tax as opposed to income tax with less money to spend than expected.

The think tank also warned increasing net migration meant spending on public services per person would barely grow for the rest of the decade, creating a £25 billion black hole in public spending. The Government is on course to spend £150 less per person on public services by 2028, as a larger population driven by higher immigration stretches Whitehall budgets.

The Office for National Statistics believes the population will rise from 67million in 2021 to 73.7million by 2036, with 6.1million of that caused by migration. The IFS said faster population growth could boost revenues through higher taxes. But public sector spending per head will rise by just 0.2 per cent a year after the election by current plans. The think tank said: “Higher expected net migration [helps] increase the size of the economy but will make... spending plans more challenging.”

The Office for Budget Responsibility, the Government’s tax and spending watchdog, expects the Government to

increase spending on public services by 0.9 per cent on average over the next parliament. The IFS said this translated into spending growth of 0.5 per cent a year per person. However, it added: “If we take the latest ONS population projections, the average annual growth in real-terms spending per capita falls to just 0.2 per cent a year.”

The IFS warned that a cash injection of £25billion would be needed to stop per-capita spending from being cut. This would require deeper cuts to spending in Whitehall if the Chancellor wanted to maintain investment levels.

Carl Emmerson, the deputy director of the IFS, said higher net migration was not automatically better for public finances. He said: “The temptation to the Chancellor is people coming here and working gets a bit more revenue in, but maybe he won’t give public services the cash they need to meet extra demands.”

Mr Emmerson described the Prime Minister’s tax and spending legacy as “quite clearly one where there’s been an increase in the size of the state”. He added: “It’s not all about the pandemic. Some of it looks like a response to changing demographics. The [free] childcare package last year [was also] a big increase in the role of the state, which had nothing to do with a pandemic.”

A Treasury spokesman said: “We provided hundreds of billions of pounds during the pandemic and Putin’s energy crisis, and ... in Autumn we could significantly cut tax. We announced the biggest ever British business tax cut to help firms invest for less, worth £55 billion in corporate tax savings, whilst the average earner will save £1,000 in tax next year compared to what they otherwise would have done.”