Adam Smith Institute

The UK's Tax Freedom Day 2008 will fall on 2 June. That means that average Brits are spending more than five months of the year working for the Chancellor, rather than working for themselves. Last year's date turned out to be 4 June – later than forecast due to the slowing economy. But in fact Tax Freedom Day 2008 is only one day earlier, since this is a leap year. And the date assumes that the Chancellor is right about his growth forecasts – with less growth, the taxes take a larger share of our income.

While the tax burden is bad enough for average families, the tax paid by poor families has been doubled. Next month, the starting rate of income tax goes up from 10 percent to 20 percent. This means that people on the minimum wage will pay a tax rate of 31 percent (20 percent plus 11 percent National Insurance) on over half their income. Under the Adam Smith Institute's flat tax proposals, people on the minimum wage would pay no tax at all.

As usual, the Budget speech was significant for what the Chancellor did not say. He did not mention that government spending will soar to £600 billion this year – that's £10,000 for every man,woman and child, twice as much as in 1997. Is the average family of four really getting good value for the £40,000 it pays out? Is the state catching twice as many criminals, doubling educational achievement, or treating twice as many NHS patients? If the government sector had grown only in line with inflation, rather than far above it, taxpayers would be £200 billion better off – enough to abolish income tax, corporation tax, capital gains tax and inheritance tax. Just think what that would do for our international competitiveness.

Now we have high taxes which make the UK uncompetitive. It used to be a very attractive place to locate, but now we have the seventh highest corporation tax in Europe. Our taxes on middle-class families are the OECD's highest. Combined with the increase in capital gains tax on entrepreneurs, and the assault on non-doms, Britain is now a much less attractive place in which to start and run a business. The Chancellor's growth forecasts overlook that. Tax Freedom Day may come later than he thinks.

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