I have now reviewed most of the Office for Budget Responsibility's forecasts issued with the 2023 budget.
I wrote my review in a series of tweets, each including the charts I referred to:
That's it: the outlook is grim and the Tories will be making it worse by choice. Those cheers from the Tory benches today will disappear very quickly, I suggest.
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The Red Book tells its own story. The five biggest items are:
1. The three year 100% capital allowances (“full expensing”) gives away about £10 billion per year of the £15 billion or so that was estimated to be raised by increasing corporation tax from 19% to 25%. Given corporation tax brings in around £70 billion each year, that is a fair chunk of the whole.
2. The extension of childcare, which costs around £5 billion a year by 2025. But is that enough?
3. The per-litre rate of fuel duty has barely moved from where it was in 1999, during which time the price of fuel has doubled. Keeping the current temporary 5p reduction costs about £5 billion as a one off, and failing to increase by RPI bakes in £2 billion less revenue in future.
4. Abolishing the pensions lifetime allowance costs around a billion per year (but of course advantages the relatively small number of people – perhaps a million or so individuals, perhaps 2% of the population – with the very largest pension pots). Increasing the pensions annual allowance brings the cost to around a billion (and that helps those with £40k to £60k of disposable income that they can afford to lock up in a pension fund – assuming they are not above the income level where the allowance tapers away).
5. Given events, I suppose we should expect about £2 billion per year increased spending on defence, even if it has the lowest fiscal multiplier.
When public spending is over £1,000 billion per year, this is all fairly small beer. Telling that incentives to companies are by far and away the largest single item.
Thanks
Can you remember the days when a Chancellor was sacked for leaking any part of the budget before it was delivered to The House of Commons? How much was leaked this time, 40% 50% or more? So why bother going through the charade of addressing the House at all?
I wonder if anyone has bothered to check previous projections from OBR against what actually happened? How often were they even close?
They are usually appallingly out
And without exception they are always over optimistic
I have just listened to the Chief Economist of the IoD (not the first institution I would go to for wisdom), informing us that the new forecast we will miss recession is “about the stories we tell ourselves”. It is indeed, as Government economic forecasts are little more than the fables of flaky economists. The last forecast we were given lasted little longer than the lifespan of a carton of fresh milk, so I have no idea why the Government is pleased with itself. Recession comes and goes, and it has nothing whatsoever to do with the Government. Energy prices go up and down and the Government has nothing to do with the changes. Nothing. It is an onlooker. The real economy passes it by on the other side of the street. There is a shortfall of £340Bn in investment, and there is no real explanation of how that scale of shortfall is going to be transformed in the short or even medium term.
I think your graphs powerfully demonstrate the abyss between the trends their Budget is creating, and the mirage of growth the Government is pretending it is going to achieve, Richard; an excoriating exposition, although I am not sure if the electors who need to do so will read them. Nothing much is changing from Osborne 2010. More austerity, cut spend, no driver of investment; and of course nothing will happen – and there it is in the graphs. Nothing.
And that is the new version of Conservative success. And the Government benches literally cheer this utter drivel.
Kitty Ussher and I did not see eye to eye during the only meeting I recall us having
Staggering that she was a Labour minister
And MP for Burnley – it’s now Tory.
A detailed analysis indeed.
Everything I’m hearing and seeing is a ‘produce more/consume less’ austerity budget as laid out by Clara Mattei in ‘The Capital Order’.
Only an unblinking political rag doll like Jeremy Hunt could deliver something like this and pretend it was serious.
And for me its back to BREXIT. What did they say? ‘Vassal state’?
Yes – we are a vassal state – of capital.
These linked TikToks sum up what you label very aptly, for me at least. https://twitter.com/real1maria/status/1634837481630887936?s=20
Have you previously published, anywhere, what you would do to reform the tax system, with particular respect to pensions, given the chance?
Yes, many times
You could either abolish all higher-rate reliefs or do as I suggest here: https://www.taxresearch.org.uk/Blog/wp-content/uploads/2021/10/The-QuEST-for-a-Green-New-Deal.pdf
Thanks.
Very interesting, but I didn’t find what I was looking for and was hoping I might.
Which was, basically, any idea how much it might cost the government to abolish the 25% tax-free allowance on private & workplace pension payments, in favour of making the state pension tax-free, instead?
Or, if not, where I might go to try & find the answer?
Why on earth should they do that?
Struck me as a rather more sensible & obvious way to persuade a lot more people not to take early retirement (given that is their stated objective) than the changes outlined in the budget.
I will e-mail you directly outlining more fully what I had in mind, if you have no objection.
I am really baffled now
My apologies, then.
I will e-mail my suggestions to my MP, instead.