Next week’s Budget is expected to bring in £35 billion worth of tax hikes for the five years to 2030 and increase UK economic growth in the short term.
Bank of America analysts predicted the increase in taxes between 2025 and 2030 would help fund an additional £57 billion worth of public spending.
This would coincide with a £22 billion increase in government borrowing to fund the plans for new investment and public services spending, according to the bank.
Such an increase would lift the figure by 0.7% as a proportion of gross domestic product (GDP) compared to March.
Chancellor Rachel Reeves’ statement was forecast to add between 0.3 and 0.4 percentage points to GDP in the meantime and be “net growth positive relative to March”.
“The Budget could be the first step towards improving trend growth in the economy,” Bank of America said.
“Less fiscal tightening also adds to the case for a cautious rate-cutting cycle from the Bank of England.”