Much wealthier country spends beyond its means

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ALTHOUGH Britons today are richer than they were in the year of the Queen’s accession, with the average Briton having more than three times the income they had in 1952, the country is still spending beyond its means, as the Government budget deficit has increased, a report by financial services firm PwC has found.

The total size of the UK economy (GDP), in 2012 prices to adjust for inflation, was £377bn in 1952, compared to £1,561bn in 2012, the research found.

Population has increased from 50.5m to 63.1m, while average income per person (GDP per capita), also in 2012 prices to adjust for inflation, was £7,500 60 years ago, compared to £24,700 today.

Gordon Singer, tax partner in PwC’s Leeds office, said: “The economy is around four times bigger now than when Queen Elizabeth came to the throne in 1952 after adjusting for inflation and, with the population only increasing by around a quarter, this implies that average incomes are more than three times as high in real terms.

“The overall tax burden as a share of national income has only edged up slightly from 36 per cent of GDP in 1952 to 38 per cent of GDP now, but how the Government spends this money has changed greatly, with the share of spending on defence down from around 25 per cent to only five per cent and corresponding rises in welfare spending on health, education, pensions and other social security benefits

“But with little scope to cut defence spending further there is a real challenge as to how we pay for further rises in spending on health and pensions as the population ages, without economically damaging rises in the tax burden.”