LONDON (REUTERS) - The size of the British state is heading back to levels not seen since the 1970s, and taxes will have to rise, a think tank said on Monday (Nov 4), as the two main political parties promise higher public spending ahead of a Dec 12 election.
"The shared commitments to ending austerity, reversing elements of it, and big infrastructure plans mean Britain could be heading back to a 1970s-sized state," Mr Matt Whittaker, deputy chief executive at the Resolution Foundation, said in a report.
Finance minister Sajid Javid announced the biggest funding increases for public services in 15 years in September, and has said that he wants to spend more on infrastructure too.
Prime Minister Boris Johnson has also said he wants lower taxes.
The opposition Labour Party has long said it plans to raise spending to undo a decade of tight spending controls by the Conservatives.
"The fact is that whatever promises are made over the course of this election campaign, taxes are going to have to rise over the coming decade," Mr Whittaker said.
Under the Conservatives, Britain cut its budget deficit from 10 per cent of gross domestic product in 2010 to about 2 per cent now.
But the deficit has started to rise again after former prime minister Theresa May relaxed her government's grip on public pay and promised big increases in health spending.
Under the Conservatives, just keeping the current share of spending on public services, plus higher infrastructure spending as planned by Mr Javid, could take government spending to 41.3 per cent of GDP by 2023 from about 40 per cent now, the Resolution Foundation said.
That would be well above the average of 37.4 per cent in the two decades running up to the financial crisis of 2008-09, and only marginally below the average of 42 per cent between 1966 and 1984.
Further health spending on Britain's ageing population would take spending above the 1970s average, the report said.
If Labour repeats its 2017 election promise of £48.6 billion (S$85 billion) of extra spending on services, coupled with a new 10-year £250 billion infrastructure plan, public spending would hit 43.3 per cent of GDP, significantly above the 1970s average, it said.
Labour finance spokesman John McDonnell said on Sunday that the party will propose increasing income tax for the top 5 per cent of earners to help fund increased public spending in its offer for the forthcoming election.
