Mind the tax gap

The strength of Britain's economic recovery has surprised everyone. So rapid has been the upswing that Bank of England governor Mark Carney is now telling households to prepare for an early rise in interest rates. For all the good news, though, there are concerns you are not experiencing the 'right' sort of growth. Tax revenues have consistently fallen short of expectations in this recovery - unlike public spending. Weakness in revenue growth matters because if it continues, the shortfall will eventually be recovered through painful tax rate increases or further public spending cuts, meaning the grind of ever-harsher austerity will continue for longer. In private, there is greater concern that the structure of the economy and the UK tax system no longer easily generate tax revenues.