Gerald Howe

There’s a lot of self-serving spin emanating from the UK government about how virtuous it is re fiscal consolidation. Here are the facts. Labour inherited an OBR budget deficit forecast of £87bn (3.1% GDP) for FY2024/25. After R Reeves’ 1st disastrous budget the actual deficit was £153bn (5.2%). Massive jump. Labour inherited OBR budget deficit of £77bn (2.7%) for FY2025/26. After RR’s disastrous 2nd budget that turned out to be £133bn (4.3%). So in its first two years it added over £120bn to borrowing/deficit (despite huge increase in taxes). The OBR forecast it inherited for this FY2026/27 was £69bn (2.3%). It is now forecast to be £116bn (3.3%). That looks like an underestimate. More likely to be closer to £130bn again. Inherited budget forecast for 2027/28: £51bn (1.6%). Latest forecast: £97bn (2.9%). Inherited budget forecast for 2028/29: £39bn (1.2%). Latest forecast: £86bn (2.5%). Far from fiscal consolidation Labour is forecast to borrow an incredible £260bn more over the 5 years from 2024/25 than the forecasts it inherited. Despite the tax rises. Which will continue. Alone among G7 countries the IMF projects the UK tax burden to rise by 3.7% of GDP 2025-31. The only other country with a rising tax burden is France (0.8%). Italy is static. Rest of G7 have falling tax burden. And let’s not forget Labour’s so-called ‘fiscal consolidation’ is all backloaded to end-decade. Unlikely to happen. So taxes will have to rise by even more.