From the OBR’s forecast:
“Taxes are forecast to increase from 36% of GDP this year to 38% by the end of the forecast, with personal taxes accounting for half the increase. The projected 2030-31 level would be a historical high in the UK and almost 6% of GDP above the pre-pandemic level.”
Higher taxes will be distortionary and revenues may be lower than the Treasury thinks:
“A higher level of the tax take increases the risk that incentives within the tax system distort or constrain economic activity by more than expected. For example, capital taxes are paid by a narrow base of typically higher income taxpayers and are often very sensitive to the behavioural responses to policy changes.
The yield from the personal tax threshold freezes across the forecast is very sensitive to future inflation and nominal earnings growth. And there are also risks that the tax gap, which is a measure of the degree of tax compliance, does not fall by as much as forecast”
The OBR also says:
- Unemployment will rise to 5.33% in 2026 before falling.
- The welfare bill will increase from £314 billion last year to £406 billion by the end of the Parliament.
- Net migration will fall – thanks to people leaving the country.
And no support for North Sea oil…
Former Treasury minister and adviser to Burnham in the Makerfield campaign Lord Jim O’Neill, who has turned down a role in his government, said Burnham’s first statement Commons was:
“The last thing investors wanted to hear… gilt yields have risen by a 0.25% in one day, which is a lot. We’ve not had that since Liz Truss days… If your country is under the focus of ‘can they come up with a sensible fiscal strategy’ on a day when the markets think ‘well no, you’re not showing any sign of it’ you’re going to have a tough day…if it stays like this your mortgage rate is going up.”
