The government's tax and spending increases announced this week in the annual budget will take the tax burden as a percentage of national income closer to the European average.

Britain will remain the lowest-taxed of the large European economies for some time. Since 1993 it has steadily converged with the rest of Europe as other governments cut back to squeeze themselves into monetary union. But there is still a large gap.

The most recent figures from the Organisation for Economic Co-operation and Development show government revenues last year were 39.5 per cent of gross domestic product in Britain, 43.2 per cent in Germany and 49.3 per cent in France.

Sweden has a tax take of 56.7 per cent, the highest in the European Union, and well above the average of 44 per cent.

The 2002 budget will add only 0.8 percentage points to the UK's tax burden by 2005-06. But the convergence is likely to continue.

The government has promised to raise health spending by 7.4 per cent above inflation each year for the next five years but its tax increases only cover the next three.

"The pressure is more for the UK moving towards Europe. What we saw this week is not the end of tax rises," said John Butler, an economist at HSBC.

Further shrinkage of the state in Europe is less likely, at least in the short-term. Eurozone countries, disciplined by the stability and growth pact, have little leeway to reduce taxes without corresponding cuts in spending. But most governments face pressure to cuts taxes in the longer term assuming they can control the costs of ageing populations.

Jacques Chirac, campaigning for re-election as president of France, has called for his country's tax burden to fall to the European average and wants aggressive tax cuts, although he also wants higher spending.

Italy hopes to limit public expenditure partly by forcing regional governments to rein in health spending. Germany has started to increase private pension provision.

On their own, figures for tax and spending as a proportion of GDP say little about a country's economic performance or its prospects. Nor do they necessarily fully represent a country's welfare burden. Government revenues exclude payments which, while not compulsory, are necessary for access to essential services.

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