Tax and living costs in the United Kingdom have hit new records. Various factors have made it one of the most expensive places to live compared to the European Union (EU).
According to The Institute for Fiscal Studies, forecasts show tax revenues will amount to 37% of national income in 2024, compared to 33% in 2019 and the highest percentage of national income since the 1940s. One of the biggest increases is in corporation tax – from 19% to 25% in the last five years. The all-round increases contributed to the UK having an inflation rate of 4.6% by October 2023, compared to 3% in Germany and an average of 2.9% in the rest of the Eurozone.
The result is a fall in living standards for many UK residents, as people are having to cut back on luxuries and even some necessities, in an attempt to survive.
Living costs: difficult choices
Father of two, Peter, has lived in the UK his whole life and is amongst those worst affected by the increases. He said: “I find it very difficult. I had to get rid of my petrol car and cash in a pension to buy an electric car which has allowed me to carry on working.”
Security guard Nick said: “My living standards have dropped dramatically. I’ve cut back on things for myself, so my wife and kids get more.”
Both Peter and Nick are not the only ones facing issues from higher prices. Government reports found that at the start of this parliament in 2019, there were 2.1 million people on universal credit, compared to 6.1 million in 2023.
Not everyone seems to have been affected as much by the inflation in tax and living costs though. Teacher Ivor said: “We haven’t had to drop our living standards but we are some of the fortunate ones.”
Despite some people not being affected, everyone has noticed the steep increase in tax.
Those fortunate enough not to feel the pressure of increased bills do seem to realise that inflation is affecting the less fortunate massively. Maurice said, “I think it’s survivable but that’s even getting more and more difficult for people. You can see the average person is suffering.”
For some the inflation has been so impactful that when asked if they have thoughts of leaving the UK, they say they would if they could. Peter said: “I’ve got family in Canada and they are saying it’s much easier over there, so if I was younger I’d be gone.”
Nick said: “We are thinking about leaving because of the rise in costs and I’ve lived in the UK my whole life.” Delivery driver Ranjit felt the same. He said: “If the prices keep going up, maybe in six or seven months, I would leave.”
Money in, nothing out
Everyone seems to agree that despite seeing an increase in payments to the government, spending on councils and public services is not leading to improvements.
Katie said, “Living costs and tax have affected our living standards because our public services are falling apart. More money needs to be spent on public services.”
Along with public services, Nick would like to see improvements made in the city he lives in, Birmingham. He said, “I’d like to see my taxes spent more adequately, more around the town.”
It may be a while until new work is done in Birmingham though, after the local council went bankrupt last September, following an equal pay bill. Even so, council tax will increase by 5.1% in 2024. Kirsty said, “I don’t think the council tax ever does do enough.”
For others, such as secondary school teacher Ivor, the issue doesn’t lie in the amount the government is spending but instead what they are spending the money on. He said, “So much of the money is spent on needless bureaucracy and yet the government will tell you we’ve put so much money into education which they have, but it’s going in the wrong places.”
He continued: “I see within my own work as a public servant that there is a tremendous amount of money wasted.” Maurice seemed to agree: “The government do spend it on nonsensical things.”
With life in the UK becoming more expensive, the government has put in place new programmes for people struggling to make ends meet.
For example, in 2024 there will be an extra £4 billion invested into the Energy Price Guarantee scheme, which caps the unit cost of energy for households. Research shows that with the help of this scheme, between October 2022 and June 2023, typical households may have saved around £1,500.
The government is also providing cost of living payments of varying sizes to eligible recipients, such as three payments totalling £900 and a one-off £150 payment for people with disabilities.
In 2024, the Department for Work and Pensions announced that basic and new state pensions will be increased by 8.5%, in an attempt to help pensioners struggling with inflation.
To see what help you might be entitled to, visit the government’s benefit calculator and get the help you deserve here: https://www.gov.uk/benefits-calculators.