The Organisation for Economic Cooperation Development (OECD) forecasts UK inflation to fall back to 2.9% next year… although this year’s figure is set to average 7.2%, the worst in the G7. At least Rishi is on target to meet one of his pledges by Christmas…

The OECD also expects the UK to hit average growth of around 0.3% this year, up to 0.8% in 2024. Better than Germany… although still small beer. Jeremy Hunt is instead pointing to the IMF figures to cheer everyone up:

“Today the OECD have set out a challenging global picture, but it is good news that they expect UK inflation to drop below 3 per cent next year. It is only by halving inflation that we can deliver higher growth and living standards. We were among the fastest in the G7 to recover from the pandemic, and the IMF have said we will grow faster than Germany, France, and Italy in the long term.”

In the meantime, the Bank of England could hike interest rates to 5.5% on Thursday…

Jacob Rees-Mogg is the face of a new Adam Smith Institute campaign against a global minimum corporation tax, which threatens to undermine levelling up. As Chancellor, Rishi Sunak spearheaded the international campaign for a global minimum corporation tax of 15%, set to come into force this year. And he claims he’s a Thatcherite…

A new report from the ASI published today, however, finds that the policy threatens the very levelling up agenda the current government were elected on; undermining key areas of UK tax policy including investment zones, free ports, business tax credits and the super-deduction policy the Prime Minister so keenly championed. Rees-Mogg adds that the policy will also level down the wider global economy…

“Tax competition between countries keeps rates low and increases prosperity. Agreeing high rates among a cabal of developed nations will keep the world poorer.” 

The report points out the ideological inconsistency of a government that champions taking Britain out of the EU, only to then sign away our financial independence via a new OECD treaty. It particularly threatens investment zones and freeports – the latter being one of the only policies Rishi Sunak can point to as proof of his pro-Brexit credentials…

“because the Pillar Two rules permit a carve-out from included income equal to 5% of eligible payroll costs—including payroll taxes paid by the employer—the interaction of the new tax rules with investment zone incentives could perversely result in higher top-up tax liability owing to lower payroll costs in the zones. This would tend to disincentivize investment and employment in investment zones and freeports.”

Just another day of a Conservative government forgetting what Conservatism means…

Read the report in full here.

Grim new forecasts from the Organisation for Economic Co-operation and Development (OECD) show the UK is now set for the weakest economic growth in the developed world next year, with no GDP growth at all throughout 2023. A worse projection than for any other OECD member – only Russia is expected to perform worse among the G20:The report also has choice words for Rishi, urging him to “consider slowing fiscal consolidation to support growth” and warning that the UK is unique in grappling with high inflation and rising interest rates whilst also whacking up increasing taxes:

“Inflation is high compared with other OECD countries in the G20 . . . that’s one thing. The other thing is there is fast monetary tightening which is obviously responding to [the inflation] and there is fiscal consolidation which is the highest in the G7.”

The Treasury wearily points out that on the other hand the IMF said only a matter of months ago that Rishi should be raising taxes to stem rising inflation, so the international economic institutions are a bit muddled when it comes to what to do to stop rising inflation. The Treasury argues that a looser fiscal policy would only make inflation worse. As for OECD/IMF forecasts they’re sceptical that it will play out as predicted, pointing out that OECD is at the most pessimistic end of forecasters, with the average forecaster expecting growth above 1%. Nevertheless, perhaps a fiscal consolidation that reduces spending to match tax revenues rather than increases taxes to match spending, might be a more growth friendly way of balancing the books…

The OECD is forecasting 4.9% GDP growth for the UK next year, the fastest in the G-7. Growth this year will be better than the OECD previously estimated at 6.9% rather than 6.7%. Guido looks forward to how doomster remainers explain this…

As well as the prospect of two years of back-to-back surging growth, it is worth noting that the pound is now higher than it was before the referendum, foreign direct investment in the UK is still massively out-performing our continental rivals and the unemployment rate in the UK is half that of the Eurozone. Thanks to Brexit!

Sunak’s corporation tax hike would see the UK’s international tax competitiveness slip from 11^th to 30^th out of 37 OECD nations, a report from the Centre for Policy Studies (CPS) warns. The report argues that the UK’s outdated business rates system, its planned corporation tax hike from 19% to 25% and the recent national insurance rise would derail Britain’s economic growth. Once all the planned tax rises come in, the UK will fall to thirtieth place on the International Tax Competitiveness Index, well behind competitors such as the United States, Germany, Canada, and Japan…

Tom Clougherty, head of tax at the CPS, explained:

 “There is nothing wrong with getting the budget balanced, but are we going to do more harm than good with more tax increases?

Right on the money… 

A spokesman for the Treasury said:

“This Government has consistently backed business. The UK has a highly competitive business tax regime and remains one of the best places in the world to do business – we have a lower headline rate of corporation tax than any other major comparable economy and generous reliefs for both research and development.”

Is that really true Rishi? Hiking taxes is clearly harming UK competitiveness…