Labour's revelation that lower wages have led to lost revenue
Members of the UK200Group of independent chartered accountancy and lawyer firms have today commented on Labour’s revelation that the current government lost £95bn in revenue during the last five years due to depressed wages and faces losing a further £109bn if the same happens during the next parliament.
The figures, put together by the Labour Party, demonstrate how stagnation in the wage market has reduced the amount of revenue received by the Treasury in recent years. They hope that by raising this issue they will be able to highlight the government’s failure to improve wage conditions and increase the revenue required to significantly reduce the growing deficit. Labour has said that if they are elected during this year’s general election they would work with business to drive up wages in order to pay off the deficit sooner.
David Whiscombe, director of tax at UK200Group member firm BKL
This is true only at the trivial level, where higher wages mean higher taxes. But they also mean higher costs and ultimately, pursued to the extreme, an inflationary spiral. It’s tempting for Government to seek to inflate its way out of crippling public debt. But it’s been tried in the past and the cure is worse than the illness.
David Ingall, past president, UK200Group
The Bank of England has been waiting with baited breath for wages to start to rise as a signal that interest rates can start to rise as well. Employers have sought to correct levels of wages over recent years, after the excesses of 2006 - 2008. If only government spending had followed a similar course. Of course if wages are lower, then tax revenues will follow. But this is a “what if” scenario and is really a fantasy that sees government income fixed and everything fitting around it. Government can only collect tax if there is economic activity and the total collected can only increase if the activity increases or the rates of tax increase. Is that the secret message that the shadow chancellor is sending? Taxes must go up?
Jonathan Russell, partner at UK200Group member firm ReesRussell
There is an argument that higher wages will produce higher taxes and hence Government revenue, but it would also bring with it inflation and the early rise in interest rates. If the economy is now growing as the Government suggests, then if there are not higher wages businesses should be making bigger profits and whilst the taxes may not be as high these receipts should also be going up. Many businesses profits are not going up and Government has forgotten the extra tax on individuals and businesses called auto-enrolment which has stifled many pay increases.
www.twitter.com/uk200group
Established in 1986, UK200Group is the leading mutual professional association in the UK with some 150 offices of quality-assured member accountancy and lawyer firms throughout the UK totalling over 550 partners, 150,000 business clients and global links in over 50 countries. UK200Group provide services and products that are designed to enhance the business performance of its members. Telephone 01252 401050, email admin@uk200group.co.uk or visit www.uk200group.co.uk
Disclaimer:UK200Group is an association of separate and independently owned and managed accountancy firms and lawyer firms. UK200Group does not provide client services and it does not accept responsibility or liability for the acts or omissions of its members. Likewise, the members of UK200Group are separate and independent legal entities, and as such each has no responsibility or liability for the acts or omissions of other members.
Back to News