An emergency increase in VAT introduced in 2010 represented a £14 billion tax increase for consumers, a new analysis has found.
Taxes have risen by about £255 per person since the coalition government came to power, according to the study by the Institute for Fiscal Studies (IFS), a respected think-tank. It calculated that net tax increases amounted to £16.4 billion.
Its findings show that while George Osborne has regularly highlighted spending cuts as the best way to repair Britain’s finances, higher taxes have also been used to close the deficit.
The analysis, which comes just days before the chancellor’s final budget before the election, found that the coalition had introduced total tax increases of £64.3 billion.
The biggest single element was the controversial decision to increase VAT from 17.5 per cent to 20 per cent in the emergency budget of 2010.
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A further £5.2 billion was raised from an increase in national insurance contributions.
David Cameron has denied suggestions by Labour that he would increase VAT again after the election to pay for promised tax cuts costing £7 billion.
The IFS said that the tax increases were partially offset by tax cuts worth £48 billion, including the £8 billion spent on increasing the amount that workers can earn tax-free. The personal allowance will reach £10,600 from April. Cuts to corporation tax have cost £5.9 billion, while popular cuts to fuel duty have cost £3.9 billion. Despite the amount spent on increasing the personal tax allowance, the IFS warned that it was difficult to find a “good economic reason” for lifting it further while the level at which people begin to pay national insurance remained untouched.
The think-tank said it was an “absurdity” that the two taxes had not been integrated. Mr Osborne is said to have looked at the idea of combining the taxes, but decided that the technicalities involved made it too risky.
Chris Leslie, the shadow chief treasury secretary, said that the IFS analysis proved that taxes had gone up under Mr Osborne’s stewardship. “The Tories have raised taxes by over £16 billion and the biggest tax rise of all was their VAT hike, which broke their pre-election promise and hit working families and pensioners hard,” he said.
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