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Budgets & fiscal events
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Public spending
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Economy and public finances
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Tax
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Political parties and elections

Time for revision: why the Chancellor needs to look again at his plans for tax cuts in the Budget

14 March 2016

Stephen Clarke
Stephen Clarke
David Finch
David Finch
Matthew Whittaker
Matthew Whittaker

This briefing note considers possible tax cuts that could feature in the Chancellor’s upcoming Budget, and looks at how these policy choices can be made in a way that better benefits lower earners.

Key findings

  • Wednesday’s Budget may be a little light on big policy announcements – particularly following the decision not to press ahead with pension tax relief reform. But the fiscal projections provided by the OBR will be watched with interest: even relatively small changes in the underlying economic outlook could threaten the fiscal mandate.
  • Any deterioration in the medium-term outlook will leave the Chancellor with difficult choices. If the revision is sizeable enough, he will face the prospect of being adjudged as being off course on his fiscal mandate of achieving a surplus in 2019-20. But even if the adjustment is more modest, he is likely to want to take action in order to maintain a buffer against inevitable in-year movements in borrowing over the course of the parliament – otherwise he faces the risk of needing to implement in-year spending cuts in the run-up to the next election.
  • He has already announced that the changing economic backdrop means that he will be implementing further spending cuts in the order of £4 billion on Wednesday. We may hear about plans for tax rises too.
  • Given this context, the need to find an additional £5 billion to fund pre-election tax cut pledges appears unreasonable. We hope that he chooses to cancel these highly regressive promises – instead diverting funds back into supporting lower income working households via UC.

Further reading

We’re going on a growth Hunt
Putting the 2023 Spring Budget in context
16 March 2023
·
Torsten Bell, Mike Brewer, Molly Broome, Nye Cominetti, Adam Corlett, Emily Fry, Sophie Hale, Karl Handscomb, Charlie McCurdy, Louise Murphy, Felicia Odamtten, Cara Pacitti, Simon Pittaway, Krishan Shah, James Smith, Greg Thwaites, Lalitha Try
New Budget, same problems
Spring Budget preview
6 March 2023
·
Molly Broome, Adam Corlett, Emily Fry, Karl Handscomb, Louise Murphy, Felicia Odamtten, Cara Pacitti, Krishan Shah, Hannah Slaughter, James Smith, Greg Thwaites, Lalitha Try
Jeremy Hunt’s smooth(ing) Budget
15 February 2023
·
Torsten Bell, Emily Fry
Stephen Clarke
Stephen Clarke
David Finch
David Finch
Matthew Whittaker
Matthew Whittaker
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