Rachel Reeves’ Autumn budget was leaked online just minutes before she was set to formally address the House of Commons, where the Budget is traditionally read. The Office of Budget Responsibility (OBR) revealed a series of predictions around the state of the UK economy after the measures come into force.
In the Budget, she announced changes to pensions, National Insurance, and a freeze on the income tax threshold. In the general election, she and other Labour politicians promised on no less than 52 occasions not to raise taxes on working people.
The OBR analysis presents a series of stark predictions, indicating a slowing economy, higher borrowing costs, and rising inflation.
The OBR has predicted that growth will slow to 1.5% which is 0.3 % slower than they had predicted earlier this year in March. A reduction in GDP growth signals slower productivity in the UK economy. In the past year, it was reported that nearly 1,000 jobs in the economy were lost each day, with several business leaders blaming the last Budget’s increase in National Insurance contributions for employers. Ms Reeves increased the tax in the last Budget, which cost employers billions. This was despite pledges made no less than 51 times during the General Election that Labour would not increase VAT, Income Taxes and National Insurance contributions.
Interest rates are also predicted to increase, which would drive up not only the cost of Government borrowing but could also hit mortgages, affecting millions of Britons. Currently, the Government spends £100billion a year on servicing the country’s current debt pile, which stands at 94% of GDP, at £2.9trillion. The OBR predicts that the national debt will be 96% of GDP by the end of the decade. Without interest rate cuts, which are now predicted to be unlikely, the cost of servicing mortgage payments is unlikely to decrease.
The National Debt will continue to rise. Already, £100billion is spent each year just paying off existing debt. With extra spending announced in the budget, and borrowing costs rising, that debt pile is predicted to grow.
The Chancellor announced the Budget today, which included a range of changes to taxation, including more than £8billion in an increase to income tax brought about by not changing the income tax threshold. Spending has also increased, with billions splashed out in additional benefits for the unemployed. Some £2.5billion will be spent on lifting the two-child benefit cap, previously described by the Chancellor as unaffordable, meaning some 18,000 families will be getting a £14,000 handout. Ms Reeves insisted in the House of Commons that the Budget was based on hard decisions and that she was “taking action” to support Britain’s economy.
