But Sunak, who has always wanted to portray himself as a tax cutter at heart, was ridiculed when independent evidence showed that the average household would pay more tax in two years, even by reducing the 1 p.m. This will be ensured by an increase in national insurance contributions next month and a four-year freeze on the personal income tax threshold, which means that most income is taxable. It does not matter, say Sunak supporters, 1p is just the initial offer. Once the recovery from the pandemic is in full swing and the inflation spiral caused by the Ukraine war has subsided, a suppression of public spending for a few years will allow a reduction of 2 or even 3 p. In an increasingly uncertain world, it is understandable that hard-pressed families are tempted to vote against tax increases. When the government says it can do little to protect them and the companies they work for, and uses its full power to denounce those who offer to take advantage of low interest rates to finance extra support by lending more, the demands for lower taxes are expected to increase. Just a few months ago, Sunak would have been forgiven for believing he would lead the Conservatives in this election. The party’s tolerance for Boris Johnson’s persistent lies was dwindling and it seemed likely that it would be abandoned before the end of the year. OBR expects consumers to bypass uncertainty about pandemic and war in Ukraine and spend their savings Boris can still get the boot, but the chancellor can not do it and for now he has to sell his idea for jam tomorrow to a skeptical crew at No. 10, who wants to spend a lot now. He must also sell it to a skeptical public, an audience that can not think of voting for his party in two years, while today he turned off the central heating. Sunak received a helping hand last week from the Office for Budget Responsibility, the forecasting unit set up by one of his predecessors, George Osborne, to move politics away from assessing the impact of government policy on public finances and the economy. wider. . The OBR has been criticized in the past for underestimating the impact of cuts on public services, public sector wages and the prosperity of the economy and business confidence. Between 2010 and 2016 it consistently overestimated the growth of business investment, then had to revise its calculations and admit that business investment in the UK – and productivity growth – had been hit by six since the 2008 crash. In their most recent decision, published in the chancellor’s spring statement last week, OBR officials again took the happy pills, arguing that employee productivity – measured as output per hour – was likely to increase by 1.3 per cent. % average. This may not sound like much, but compared to the average growth rate of 0.7% in the decade after 2010, it is extremely optimistic. And when business investment has remained at or near zero for so long, it is difficult to see where the funding for such a productivity boost will come from. This year may be different. The OBR expects a major tax cut on business investment to trigger a 10% revival this year. But it is a lump sum – as with so many of his government’s initiatives – and its impact will soon wane. The OBR also expects consumers to bypass the uncertainty surrounding the end of the pandemic and the war in Ukraine and start spending their savings. Up to 150 150 billion of the estimated 250 250 billion κατά raised during the pandemic could remain. “The recent sharp drop in consumer confidence makes it difficult to justify such a large downward revision of the savings rate,” said Samuel Tombs of Pantheon Macroeconomics. Without the projected increase in business investment and productivity, and the oversupply of consumer spending, Sunak’s economic recovery will be greatly diminished. Tombs says the OBR will be forced to reconsider its forecasts and expects the downgrades to be on the menu. This would be a disaster for a chancellor who chose to accept criticism for his parsimony today as a reasonable price to pay for praise before the next election. His tax cuts would be inaccessible or he would only be revived using the money he borrowed. The bet would be a failure and his party would probably pay a high price.
