- A myth has taken hold on the left of British politics that Britain is under-taxed
- In particular, an increasing number of people argue that middle earners pay less tax than their European counterparts, and that there is room to tax them more
- However, this rests on a statistical error. Britain only looks like it has lower taxes because our workers pay lower social security contributions. But that is because workers cover major costs – including auto-enrolment pensions, student loans and elderly social care – outside of general taxation
- Once you take account of these costs, the ‘tax gap’ vanishes
A myth has taken hold of the British left that Britain is under-taxed, but the numbers do not stack up, according to a new briefing from the Centre for Policy Studies.
‘No, Britain is Not a Low-Tax Country’, written by CPS Director Robert Colvile, shows that the claim that the British middle-classes are under-taxed compared to their European counterparts is based on a misreading of the data.
As work from the Institute for Fiscal Studies has shown, the UK is in line with international norms for the amounts raised through income taxes and VAT. However, our figures for social security contributions are much lower – 6.6% of GDP against an EU14 average of 12%. This has led to claims that more taxes could be levied in order to fund the increasingly bloated state.
However, the CPS briefing points out that this is not an honest comparison. In many European countries, social security contributions also fund entitlements that Britain requires workers to cover through other means. For example, auto-enrolment pension contributions – typically around 8% of salary once contributions from employers, employees and tax relief are combined – are classed as personal saving and therefore excluded from the calculations. This also explains why the state pension is lower in the UK than EU: the average OECD pensioner draws around 7% of their income from private pensions, whereas in the UK the figure is roughly 35%.
Once this issue is accounted for, the UK is firmly in the middle of the pack – in fact, it has higher taxes on labour than France.
Another difference between Britain and other countries is higher education. In many other countries, this is largely or wholly through taxation, whereas we have a system of student loans. Those individuals repaying them would be paying among the highest total tax rates in the OECD, level with Sweden in terms of the percentage of earnings paid to the state. There are other, similar costs such as rail travel, TV licences or elderly social care which also increase the de facto tax rate in Britain.
The CPS briefing adds that such cross-country comparisons need to be treated with caution – the architecture of social security and higher education systems is very different across the various countries, and the OECD does not have pension data for some nations. But the claim that the British middle classes are notably under-taxed is definitely a zombie statistic, and should be treated as such.
Robert Colvile, CPS Director and briefing author, said:
‘It is frustrating to see how a simple misreading of the data has led to a situation whereby it has become orthodoxy for those on the left to claim Brits are under-taxed.
‘We are not. We simply have a system whereby some entitlements funded through general taxation in other countries are funded differently here. Once you take into account private pensions, student loans, elderly social care and so on, you begin to see the full picture.’
ENDS
NOTES TO EDITORS
- Robert Colvile is Director at the Centre for Policy Studies
- ‘No, Britain is Not a Low-Tax Country’ is available under embargo here
- For more information or interview requests, please contact Emma Revell on emma@cps.org.uk or 07931 698246
- The Centre for Policy Studies is one of the oldest and most influential think tanks in Westminster. With a focus on taxation, economic growth, housing, immigration, and energy abundance, its goal is to develop policies that widen enterprise, ownership and opportunity
Date Added: Saturday 5th September 2026
