Personal taxes important to future government revenue

The Government needs more taxpayers to earn more money in order to help balance the nation's books.

According to the new fiscal sustainability report from the Office for Budget Responsibility (OBR), the greater numbers of higher earners there are in the UK the better it is for the public purse.

Since the UK operates a progressive tax regime - the richer pay more than the poorer - the OBR said that every one per cent increase in the overall share of wages which goes to the top 5 per cent of earners means that the state benefits to the tune of £2.4 billion.

From 2000 to 2008, that top 5 per cent of earners saw their take of the wages available in the UK climb from 23.3 per cent to 26.4 per cent of the total. This produced an additional £7.2 billion in tax revenues.

The OBR report stated: "If the recent trend of increasing income inequality were to continue it would potentially drive an increase in personal tax receipts. Conversely, a reversal of income inequality would lead to a fall in revenues."