Booming British Economy with a Dark Lining of a Growing Deficit
It is clear the economy of Britain is doing well but there is something many do not understand. The tax receipts are not as booming as the economy and the Chancellor has been forced to borrow more. In a nutshell, the economic recovery was welcome but tax revenues are still below what was expected. In fact, 2014-15 expected tax receipts were 5 percent but the actual increase stood at just 2 percent. As a result, the government has been borrowing more to ensure the huge gap between tax incomes and spending has been bridged.
This matters a lot because corporation tax cuts and system changes like depending North Sea oil revenues and other taxes make Britain heavily reliant on National Insurance and income tax to ensure bills from Government are paid. Also, as much as there are lots of jobs in the country today, they are not well paying and the government is not really receiving lots of funds from them in a time when the threshold of income tax has been raised. In turn, the government has no choice but continue wringing lots of higher earners more. For example, 27.4 percent of income tax was paid by the top 1 percent of earners with the top 10 percent of earners paying 58.7 percent of the total income tax.
Envy of the nations
Essentially, the news of a booming economy is great news to every British citizen and the envy of the nations, especially its neighbours in Europe who are seriously going through tough times. Nonetheless, companies might begin hiring and consumers start to spend more than ever before, although the funds are not really trickling into the economy. The government essentially expected a 6.5 percent surge of income tax receipts in this current financial year but they have gone the other way, descending by almost 1 percent. Due to this, about 2.6 billion sterling pounds have been piled onto the deficit with the prospect of spending cuts or paying more taxes rising for the gap to be filled.
Additional jobs didn’t do the trick
There was an expectation that additional jobs would cushion on the lost tax but the withering of corporation tax has not really helped the situation, including the fact that vehicles are very efficient today thus plummeting the fuel duty as drinkers and smokers are either dying or giving up on the habit lowering the “sin” taxes.
Filling the widening gap has always been in the cards as politicians have contemplated raising stamp duty plus a number of property taxes, meaning that in the developed world they just might be the highest. However, the politicians have resorted back to the usual three huge victims of VAT, National Insurance and income tax, where each one of them has been contributing billions in contrast with days past.
The problem of Britain’s economy growing yet there is a deficit is largely due to the fact that there is a ceiling on how much can be raised while tax revenues largely depend on the state of the British economy. As the government continues to tax more on VAT, National Insurance and income tax, the more it continues to lose, especially if people stop working and spending.