Fifty years ago, Tax Freedom Day fell over a month earlier (23 April) than it does now. When England won the World Cup in 1966, it was still only 2 May. Then in the late 1960s, under Harold Wilson’s Labour administration, the date moved much later, ending up at 26 May in 1970. The incoming Conservative government of Edward Heath government managed to bring it a little earlier, but before long it moved later again, hitting 2 June in 1975.
Over the next decade, Tax Freedom Day generally moved later, reaching a peak of 12 June in 1983 – reflecting Margaret Thatcher’s desperate efforts to balance the government’s books, even during a recession. During the rest of her term of office, she brought Tax Freedom Day earlier and earlier in May.
In the late 1990s, when Gordon Brown’s expansionary agenda started to bite, Tax Freedom Day moved back into June again. It could have been a lot later, but Brown’s massive borrowing enabled him to continue spending without raising the apparent tax burden still further.
Despite the financial crisis and a change of government, the date has remained stuck at the end of May for most of the last twelve years.
The big changes
1973-1974: The massive jump of 16 days was due to the sudden and very high inflation that resulted from the ‘Barber Boom’. This pushed many earners into higher tax brackets (fiscal drag), and National Insurance receipts rose as nominal incomes rose too.
1979-81: The even bigger 20-day jump reflects the 1979 ‘austerity’ budget which increased VAT (to 15%) and other taxes. Recession also reduced earnings, leaving the tax burden a higher proportion of the national income. A rising pound slowed export earnings, while another tough Budget increased tax revenues from income and wealth.
1997-2001: Most of this 9-day jump is down to Gordon Brown’s first Budget in 1997, which introduced a windfall tax on utilities, changes in advance corporation tax, fuel duty rises, and the end of mortgage interest relief, producing a massive rise in tax revenues.