As party-time nears, James McKillop learns he has to work 144 days next year for nothing

AT the stroke of midnight on Hogmanay when we raise our glasses to toast the New Year, no doubt we will all harbour a specially kind thought for the Chancellor of the Exchequer. What a man of vision and courage . . . a man who is not afraid to buck the trend. ``God bless you Kenneth Clarke for knocking a whopping 26p of a bottle of whisky!''

It would be an unkind soul, no less a deadpan cynic than the Rev I M Jolly himself, who was sufficiently tactless to suggest: ``Aye, but what the Chancellor giveth, the Chancellor taketh away.''

Sadly, the economists who beaver away for the Adam Smith Institute, the free-market policy think-tank, form a veritable congregation of Rev Jollys. While most of us are attempting to put our troubles to one side, the Adam Smith lot gleefully prepare a report which details just how many days from Ne'erday those of us fortunate enough to be in employment have to work for the Government before we can start earning for ourselves.

Next year it will be 144 days. In other words we will be working up until Saturday, May 24, to pay off our taxes. That is Tax Freedom Day.

The impact of Mr Clarke's budget - which some of us might have naively, but briefly, thought, with its 1p off income tax and a cheaper bevy, was a bit of a pre-election giveaway - has been to add an extra day's work on the time we slave for the Treasury.

``Nearly 40% of our national income will be swallowed up in taxes in 1997,'' they reckon. ``That means we will work nearly five whole months for the taxman before we can finally start working for ourselves.''

They are quite smug about Tax Freedom Day in the Adam Smith Institute, whose offices are at Great Smith Street in London, just a stone's throw from the House of Commons, where they are confident their opinions are heard.

``It provides a highly visible check on how much of our income is spent by politicians,'' they declare. ``We are going to continue to publish these figures each year.''

No matter what happens in the next few weeks, Kenneth Clarke will probably go down in history as a highly effective Chancellor. Whichever party wins the election, it will inherit an economy which has not been in such good shape for a considerable time.

Unemployment will continue to fall, the budget deficit is closing, and Government borrowing is being reduced year upon year. Unfortunately for the Tories, after seventeen-and-a-half years, the UK public might have had enough of their style of government.

Even so, history will also record that Mr Clarke's last three budgets have each made the tax burden heavier. As a result Tax Freedom Day is now more than a week later than it was during its 1993 low - then it was May 15.

But even that is far short of the heady days of 1965, when we had paid all our tax bills before the end of April. The Prime Minister at the time? Why it was Labour leader Harold Wilson.

Although she sprang to power with the last-minute General Election promise that she would cut taxes, the tax burden today is still less burdensome than it was during the whole of the then Mrs Thatcher's term of office.

Taxes remained high during her reign largely because this down-to-earth grocer's daughter was determined to cut the country's debt.

Kenneth Clarke has suggested that as an increasing proportion of the tax bill is shifted on to business, the average family of two parents and two children will face lower direct taxes next year. He says they will be #270 better off . . . the Adam Smith Institute reckons they will only be saving #192. Even so, they will still be handing over some 30% of earnings in tax.

Last year the Rev Jolly economists employed by the institute reckoned that if, under a Labour government, Scots paid a 3p Tartan Tax for devolution it would add an extra two days' work for the Government.

This year they say that if Tory Central Office claims are accurate - and the right-wing institute does not necessarily go along with Conservative costings on this one - that Labour pledges will add #30bn to the nation's bills, then the impact on Tax Freedom Day would be dire.

If these figures were anywhere near accurate, and they are feverishly disputed, they would push the total tax take from 39.5% to 43.7% of national product, the Jollys predict.

That would add 15 days to Tax Freedom Day, pushing it on to June 8. Whichever way you look at it, that is pure speculation based on figures produced by a more than interested party.

On the other hand, no matter what you might think, the Jollys point out that the UK currently has one of the lightest tax burdens in Europe. Our May 24 freedom date compares with a EU average of June 5, with Ireland, Germany, Greece, Austria, France, Luxembourg, Italy, Belgium, Netherlands, Finland, and Sweden all imposing heavier taxes than here.

Nevertheless, they say we could do better: Tax Freedom Day in the US, Switzerland, and Japan is April 21.

There you have it: the Adam Smith Institute is pushing for a low-tax economy to encourage growth.

The alternative? ``Britain could still end up as a high-tax economy, less attractive for foreign investors, and less friendly to home-grown entrepreneurs.''

And with these final remarks the Rev Jollys of the Adam Smith Institute hope you all have a happy New Year.