- 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 low 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’ more than 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 Robert Colvile and cited today by Tom Calver in The Sunday Times, shows that the claim that the British middle-classes are under-taxed is based on a misreading of the data.
As work from the Institute for Fiscal Studies has shown, the UK is paying exactly the same amount of tax as the European average, or slightly more. The ‘tax gap’ comes entirely from the fact that social security contributions – National Insurance, in the UK – are much lower here, at 6.6% of GDP in 2019 against an EU14 average of 12%.
However, as the Institute for Fiscal Studies has pointed out, this is not an honest comparison.
In most European countries, social security contributions are compulsory payments that fund a range of public services, including pensions and social care. In the UK, many of these costs are borne by individuals and/or employers.
In particular, auto-enrolment pension contributions – typically around 8% of salary – are classed as voluntary saving and therefore excluded from the calculations.
The difference between our social security systems, says the IFS, ‘more than explains’ the tax gap between Britain and Europe.
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 workplace pensions, whereas in the UK the figure is roughly 35%.
Another difference is higher education. In many other countries, this is paid for largely or wholly through general taxation. In Britain, tuition fees add another 8% to the tax rates of earnings above the repayment threshold, putting those repaying them firmly in the upper tier of European taxpayers. Then there are other costs such as rail travel or elderly social care.
The CPS paper cautions against making specific cross-country comparisons – while it is possible to draw up an approximate ‘league table’ based on headline rates, the architecture of social security, and the associated tax reliefs, is very different across the various countries, and the OECD does not have pension data for some nations. But the claim that the British public are notably under-taxed is definitely a zombie statistic, and should be treated as such.
Robert Colvile, CPS Head of Small Business and Entrepreneurship 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 Head of Small Business and Enterprise at the Centre for Policy Studies
- ‘No, Britain is Not a Low-Tax Country’ is available 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: Sunday 4th October 2026
