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…
Tom Baldwin, author of Starmer’s hagiography, spoke to Times Radio:
Tom Baldwin: “I think he’d like to do something. He’s very dutiful and driven by service. That’s why he came into politics. I think that’s characterised his time as prime minister. He hasn’t always sought popularity or been good at being popular. But I think he has some of the necessary qualities that we actually do want in a prime minister. That resilience, that relentlessness, that ability to carry the weight and the job really does weigh very heavily on people and he carries that weight very, very well.”
Jo Coburn: “NATO Secretary-General?”
Tom Baldwin: “I think that’s something that he would be interested in. I think it probably requires Andy Burnham’s government to support him in that and these are some of the questions which Andy Burnham has to resolve quite quickly.”
