9 June 2022 Only Modest Permanent Tax Cuts are Possible Within the Fiscal Rules

The OBR’s March forecasts suggest tax cuts equal to 1.0% of GDP are permissible under the fiscal rules.

But since then, the Treasury’s borrowing costs have risen, reducing scope for tax cuts to 0.7% of GDP.

The Tories will be reluctant to ditch the rules, as this would inhibit their ability to criticise Labour’s plans.

Samuel Tombs (UK Economist)U.K.

26 May 2022 Upside Risks to Public Borrowing Won't Stop Mr. Sunak Supporting Households

Public borrowing in April was in line with the OBR’s forecast, but expect upside surprises later this year.

Mr. Sunak likely will not opt to reduce the main rate of VAT; firms would benefit more than households.

Bringing forward April 2023’s large CPI-linked increase in benefits to October would make the most sense.

Samuel Tombs (UK Economist)U.K.

6 May 2022 New Forecasts Imply the MPC Intends Only One-to-Two More 25bp Hikes

At least two MPC members now think Bank Rate does not need to rise any further in the near term.

The MPC’s three-year ahead forecast for inflation, based on market rates, is its lowest for over 13 years.

Markets’ rate expectations fell yesterday, but they still look too high in light of the MPC's new projections.

Samuel Tombs (UK Economist)U.K.

27 Apr 2022 Public Borrowing Likely to Exceed the OBR's Forecast This Year

The estimate of public borrowing in 2021/22 almost certainly will be revised down over the coming months.

But we think public borrowing is on course to overshoot the OBR's forecast in 2022/23 and beyond.

The OBR's assumption that productivity will grow at double the pace seen in the 2010s is implausible.

Samuel Tombs (UK Economist)U.K.

24 Mar 2022 Incomes Still Set to be Pummelled, Despite Last-Minute Tax Changes

• Tax and benefit changes will lop 1.3% off disposable incomes in 2022-23, despite Mr. Sunak's new tax cuts.
• The Chancellor could have been bolder; he has more headroom against his fiscal targets than in October.
• Don't bank on extra pre-election tax cuts; the OBR is too upbeat on households' spending and productivity.

Samuel Tombs and Gabriella DickensU.K.