The OBR have projected that the Chancellor will meet his fiscal targets for 2027-28. But, NIESR has long argued that this focus on arbitrary targets is not what should determine fiscal policy; rather we need a new framework where the emphasis is on improving outcomes for UK households and different policies are independently examined.
The decision to go ahead with the rise in corporation tax from 19 per cent to 25 per cent will dampen GDP and hurt the supply side of the economy in the long run, though this is mitigated to a degree by the range of measures the government has announced to support business investment.
The Chancellor announced increases in spending in some areas, but it was disappointing that he failed to address public-sector pay, or announce more public investment, at a time of falling output and high inflation.
While three-quarters of UK households will see their disposable incomes increase in 2023-24 compared with 2022-23, the bottom half of the income distribution – some 14 million households – will have lower living standards than two years ago. Instead of a general subsidy to everyone, policy needs to be targeted at the half of the population who need it most; NIESR proposes to use a Variable Price Cap will achieve this.
The decision to pay childcare costs upfront in Universal Credit is a welcome move. However, we believe the Chancellor’s announcement of more places on skills boot camps to encourage over-50s back to the workplace is unlikely to work as this group tend to be more concerned about health risks, job security, and a more tailored workplace balance.
It’s reassuring to see the government’s commitment to Levelling Up and devolution deals though we worry that the government’s Levelling Up policies will not benefit the whole country. While the policies will help cities, there is no evidence that city development will generate spill-overs to suburban, rural and coastal areas.
We are delighted to invite you to our Autumn 2021 Economic Forum, at which we will present and discuss NIESR’s latest forecasts on the UK and global economies, with an opportunity for you to ask questions.