The Government has reluctantly divulged the news that the tax take slumped by £32 billion last year - the most serious collapse in receipts since the early 1920s.
This equates to just over £1,000 for each of Britain’s 30 million taxpayers and unless public spending is significantly reined in, plugging the gap would result in a 10p increase in income tax.
Figures released by the National Audit Office show that revenue from income tax, national insurance, VAT, stamp duty, corporation tax and other levies fell by £21.7 billion as the economic downturn hit.
Debts, along with liabilities from legal claims brought by taxpayers, meant money flowing into the Exchequer could fall by a further £10 billion.
Stamp duty receipts, in particular, fell due to few property transactions as a result of the housing market downturn, while VAT receipts plummeted due to the reduction last December from 17.5% to 15%.
The slump in tax receipts has been brought about by rising unemployment - fewer people paying tax but spiralling benefit bills.
Many experts believe it could take more than 10 years to get the nation’s finances back into balance.
In related news today, the Office for National Statistics revealed that UK public sector borrowing soared by £13 billion in June, up from £7.5 billion a year ago.
This takes the nation’s net debt to £798.8 billion - an increase of £157 billion compared with a year earlier.
While the figure was lower then expected, it represents the highest proportion of UK output since records started - equivalent of 56.6% of UK Gross Domestic Product (GDP).
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