Jeremy Hunt’s Spring Budget has been hammered, as analysts call to question the true burden on households and the chancellor’s ability to stick to fiscal rules.
Though Hunt dubbed the statement a "tax-cutting budget," a further 2p cut to national insurance to 6% for many and extended freezes on the likes of alcohol and fuel duty are set to be shadowed by the effects of hikes elsewhere, commentators said after Wednesday’s statement.
“Taxes are going up not down,” Resolution Foundation warned on Thursday, “this will be the greatest tax-raising Parliament since the Second World War”.
Tax relative to gross domestic product (GDP) will rise from 33.1% in 2019, to 36.5% by 2024, before then climbing then to 37.1% in 2028, as per the group.
Think tank IFS echoed the view, noting that by 2028, tax as a share of national income would be close to a “record level”.
Even so, according to IFS forecasts Hunt is “barely” set to keep within OBR fiscal rules, whereby debt must fall as a percentage of GDP in the final year of five-year forecasts.
“The combination of elevated debt and low nominal GDP growth makes it extremely difficult to get debt falling,” the think tank said, with this set to meet the five-year target “set to fall by the tiniest of margins”.
To make matters worse for Hunt, Citi analysts said OBR forecasts for GDP to rise 8% this year may be way off, leaving the UK with as much as a £60 billion fiscal black hole.
“We think post-Covid fiscal headwinds are only just beginning,” the bank said in a note, as it warned further “supply shocks” were likely in the future.
Hunt had delivered the Budget, which is expected to be the government’s last before the next general election, on Wednesday, with handouts likely key in securing votes.