In the run-up to last year’s Budget, two main criticisms were expressed in the media: the UK tax burden is already exorbitant, and government spending is excessive. The taxation and spending plans unveiled by the chancellor on 26 November 2025 only helped fuel this narrative. But what is the truth behind these claims?
To find out whether the UK in the past decade has truly become a high-tax, high-spend jurisdiction, we can compare it to three neighbouring G7 countries – France, Italy and Germany, which have the most similar economies, populations and welfare states.
Turning first to total tax revenue as a percentage of GDP, according to the OECD’s Revenue Statistics 2025, the preliminary data for 2024 indicates that the UK’s tax-to-GDP ratio was 34.4%, while Germany’s rose to 38%, Italy’s reached 42.8% and France scored 43.5%.
The tax increases recently announced by the government are expected to push the UK’s ratio to about 38% in 2030. Nonetheless the UK should continue to be the country with the lowest tax-to-GDP percentage among these four European countries, as Germany is likely to see its ratio surge too.
Competitive for workers
The UK does not seem uncompetitive, either, on individual taxes. The opposite, in fact, appears to be true.
The average worker is taxed much less in the UK
In a separate report, Taxing Wages 2025, the OECD found that the income tax paid by an individual on an average wage living in the UK, plus any employee and employer tax contributions, less any cash benefits received, is equal to a maximum of 30% of their gross income (the precise percentage varies between 27.5% and 29.4%, depending on marital status and number of children). In France, Italy and Germany, this ratio is over 40% (and closer to 50% than 40% in France).
In other words, the average worker is taxed much more in these countries than in the UK.
VAT and corporate
Turning to VAT, we can comfortably rely on another indicator produced by the OECD: the so-called VAT revenue ratio (VRR), which measures the extent to which a VAT regime collects VAT at the standard rate on the total consumption expenditure of a country. A VRR of significantly less than 1 typically indicates that reduced rates, zero rate and exemptions are used quite generously.
The UK’s VRR is 0.49, lower than that of France (0.53) and Germany (0.57). Italy’s VRR is 0.45 but that figure is affected by the application of a reduced rate of 10% VAT to hospitality and tourism-related providers such as restaurants and hotels. If this ‘distortion’ were excluded, the UK’s VRR would probably be the lowest, indicating it has the most generous VAT system of the four countries.
Finally, turning to corporate income tax, the UK wins again. According to data from the Tax Foundation Europe, taxable profits of companies based in the UK are subject to a headline, combined statutory rate of 25%, versus 25.8% in France, 27.8% in Italy and 29.9% in Germany.
The UK’s state pension spend is the lowest
Spend side
What, then, about the spending side? In total, as a percentage of GDP, the UK spends far less than the other three countries. In 2024, according to the International Monetary Fund, the ratio of government spending to GDP in the UK was equal to 44%, versus approximately 50% for both Italy and Germany and over 57% for France. And this despite the surge in interest payments on the national debt in the UK, which skyrocketed from £24.7bn in 2020/21 to £106.7bn in 2023/24.
With populations across Europe ageing, one of the major sources of government spending for any European country is now the state pension. But again, if we compare the UK to its neighbours, the government does not spend anywhere near what other governments incur in state pension payments. In fact, according to recent research by the House of Commons, British pensioners rely on the state pension for less than 50% of their retirement income, compared with over 80% in Italy, France and Germany.
The claim that the UK has become a high-tax, high-spend jurisdiction – at least, compared to its main European neighbours – therefore appears unfounded.
