Percentage of workers’ pay going to taxman still at a record high, warns OBR
22 November 2023, 14:33
The tax burden on workers is still set to reach a post-Second World War high of 38% of gross domestic product, the Office for Budget Responsibility has said.
Listen to this article
Loading audio...
"While personal and business tax cuts reduce the tax burden by half a percentage point, it still rises in each of the next five years to a post-war high of 38% of GDP," the OBR said.
This is in spite of the Chancellor giving workers a £450 boost by cutting NI contributions.
But the Office for Budget Responsibility said the economy as a whole "has proved to be more resilient to the shocks of the pandemic and energy crisis than anticipated".
“We now expect the economy to grow more slowly over the forecast period" and "inflation is expected to be more persistent and domestically fuelled than we previously thought,” the OBR said.
Read more: Jeremy Hunt freezes alcohol duty in Autumn Statement 'to save boozers 3p a pint'
This persistent inflation boosts tax revenues but also raises the cost of welfare, while higher interest rates add to the expense of servicing the Government's debt.
And it could add to the squeeze on departmental budgets, which have been left largely untouched despite rising costs.
"It is mainly due to the Chancellor's decision to leave departmental spending broadly unchanged that higher inflation and other forecast changes reduce borrowing by £27 billion in 2027-28 compared to our March forecast," the OBR said.
"The Chancellor spends this windfall on cuts in national insurance contributions, permanent upfront tax write-offs for business investment, and a package of welfare reforms, which together provide a modest boost to output of 0.3% in five years.
"He still meets his target to get debt falling as a share of GDP in five years' time by an enhanced margin of £13 billion, but mainly thanks to the rolling nature of the rule giving him an extra year to get there.
The shadow chancellor said British people are still paying the price for the Conservatives' "economic recklessness" following last year's mini-budget.
Speaking in the Commons, shadow chancellor Rachel Reeves said: "Just last year we saw the true cost of the Conservatives, when their kamikaze budget crashed the economy leading to market turmoil, pensions put in peril and a spike in interest rates.
"1.6 million families will see their mortgage deals end this year, those remortgaging since July have seen their payments rocket by an average of £220-a-month and next year one-and-a-half million families will face a similar fate.
"The Conservatives' economic recklessness inflicted a Tory mortgage penalty on families across the country."
She added: "This Tory economic recklessness is not a theme of the past, the British people are still paying the price and we say never again
