Income tax receipts predicted to fall short
13 Oct 2014
The Office for Budget Responsibility (OBR) has stated that it expects UK income tax totals to fall short of Government targets this year.
Robert Chote, head of the OBR, said: ‘We’ve been getting fewer pence of revenue coming in for every pound of wages and salaries that’s generated. From the perspective of the public finances that’s not particularly good news’.
Increases to the tax-free income allowance combined with low wage growth have been cited as major causes of the problem. Latest figures from HM Revenue & Customs (HMRC) show that an increase in the number of self employed individuals is also a contributing factor, with 35% earning less than the £10,000 tax free allowance.
A recent study by the Trades Union Congress (TUC) has also shown that real earnings growth is at its worst in 150 years. The study, based on figures from the Bank of England, shows that the total decline in real earnings since 2007 is over 8%. Looking back at major earnings crises in the 19th and 20th centuries shows that real earnings generally returned to their pre-crisis growth within two years.
TUC General Secretary Frances O’Grady said: ‘It’s shocking that even the most infamous periods of pay depression in the last 150 years pale in comparison when looking at the current seven-year collapse in earnings’.