a ukpublicrevenue.co.uk briefing:
UK Public Revenue Since 1900
Nobody, in 1900, speculating on the future of government, could have imagined the astonishing growth of public revenue in the 20th century. You can see how it all happened in the United Kingdom in the charts below.
A Century of Public Revenue
In 1900 public revenue in the United Kingdom was 10 percent of GDP. Now it is 37 percent GDP
after peaking at 43 percent GDP in the early 1980s.
Chart 3.21:
Public Revenue 1900-2017
Public Revenue in the 20th century ratcheted upwards in two great steps to finance the great exertions of the world wars.
Prior to World War I, public revenue sat at about 11 percent of GDP. Then, after peaking at 33 percent in 1921
it settled back to about 22-25 percent of GDP, and remained at about that level,
except for a surge at the start of the depression in the 1930s.
In World War II public revenue surged to 37 percent of GDP in 1945.
After World War II, public revenue consumed about 37 percent of GDP, and rose to a peak of 40 percent of GDP
in 1950 before declining
to 33 percent by the end of the 1950s.
In the 1960s revenue climbed steadily, reaching nearly 41 percent of GDP by 1970. In the 1970s revenue declined
to 33 percent by 1973, and then fluctuated between 35 and 39 percent of GDP.
In the early 1980s public revenue surged to over 43 percent of GDP in 1982-83. Then it began a steady decline
bottoming out just below 35 percent of GDP in 1994.
After 1994 public revenues increased up to 37 percent GDP in 1999, and exceeded 39 percent GDP in 2008. In the
2010s public revenues have jogged along at about 36 to 37 percent GDP.
Income Tax Revenue since 1900
Income tax has increased in two steps during the 20th century as governments increased
taxes to fund wars.
Chart 3.22:
UK Income Tax Revenue 1900-2017
Income tax began the 20th century at 2 percent of GDP and peaked at 3 percent of GDP in 1903, and jogged
along at about 2-3 percent of GDP until World War I.
World War I saw an extraordinary mobilisation of national resources, and income tax increased steadily
throughout the war, peaking at 13.5 percent of GDP in 1921. In the rest of the 1920s income tax declined
to 8 percent of GDP. Then income tax perked upwards to 10 percent of GDP in the depths of the Great Depression.
In the 1930s income tax amounted to 7-8 percent of GDP, but World War II saw a huge increase, up to 20 percent of GDP by the end of the war in 1945.
After World War II income tax dropped to 12 percent GDP by 1948. It was about 14-15 percent in the early 1950s and declined to 10.2 percent of GDP by 1960.
In the late 1960s income tax rose to 13.75 percent of GDP by 1970 and then bobbled along for four decades between 12 and 14 percent
of GDP, peaking at 14.9 percent in 2008.
In the 2010s income tax has declined down to about 12 percent of GDP.
National Insurance Revenue since 1945
National insurance contributions began with Lloyd George’s People’s Budget in 1910.
But until 1945 national insurance contributions were collected and managed by “approved societies”
rather than the government.
Chart 3.23:
National Insurance Revenue 1947-2017
After nationalization, national insurance contributions amounted to 2 percent of GDP. After rising quickly
to 3 percent of GDP, contributions leveled off during the 1950s.
Starting in the late 1950s, national insurance contributions began a steady ascent, breaching 4 percent of GDP
in 1964 and 5 percent of GDP in 1975. In 1977 national insurance contributions peaked at 6 percent of GDP,
before falling back to 5.1 percent of GDP in 1979.
In the early 1980s national insurance contributions increased, peaking at 6.5 Percent of GDP in 1984. In the late 1980s national insurance contributions mildly declined to under 6 percent of GDP, a level that persisted
throughout the 1990s and into the 2000s.
Starting in 2004 national insurance contributions increased briskly, reaching 6.5 percent of GDP in 2007
and peaking at 6.9 percent in the recession year of 2009.
In the early 2010s national insurance contributions declined mildly down to 6 percent GDP. But they jumped up to 6.4
percent GDP in 2017 and are expected to remain there.
Indirect Tax Revenue since 1900
Since World War I, indirect taxes have collected mostly 13-15 percent of GDP.
Chart 3.24:
Indirect Tax Revenue 1900-2017
Indirect taxes (sales, excise, rates, and value-added taxes) began the 20th century at 7 percent of GDP, and climbed
to 8.6 percent of GDP by 1904. indirect taxes declined as a percent of GDP down to 5.5 percent in the World War
I inflation.
After World War I indirect taxes rocketed to 18 percent of GDP by 1921 before sharply declining to 11.7 percent of GDP by 1925. In the 1930s indirect taxes declined gradually, down to 10.7 percent of GDP by 1941. For the rest of
the war, taxes increased back up to 16.4 percent by 1946.
In the 1950s indirect taxes started to decline, down to 12.6 percent of GDP by 1960, but in the mid-1960s they
started to increase reaching a peak of 15.5 percent of GDP in 1970.
In the 1970s indirect taxes fluctuated, sinking to 11 percent in 1975 before climbing back up to 15 percent of GDP
in 1982. In the rest of the 1980s, the 1990s, and the 2000s indirect taxes collected about 15 percent of GDP
percent of GDP.
In the mid 2010s indirect taxes climbed over 15 percent of GDP.
