Huge tax cuts and a borrowing surge: The Chancellor has opted to boost short term growth and interest rates while setting the public finances on an unsustainable path – here are five key takeaways from today’s #MiniBudget – THREAD🧵
1 - £45 billion of tax cuts were announced today – going far beyond election promises to cancel corporation tax increases and reverse this year’s National Insurance rise. These are the largest tax cuts to be announced in a single fiscal event since the 1970s.
2 - A record increase in borrowing: The decision to combine the largely unavoidable higher deficit caused by rising energy prices/interest rates with permanent tax cuts will drive up borrowing by £411 billion in coming years. No Chancellor has increased borrowing by so much.
3 – Future spending could be on the cards: The Chancellor has said that debt falling remains his key metric for fiscal sustainability – but achieving that during the middle of this decade could require spending cuts of £35 billion in 2026-27.
4 – Almost two-thirds (65%) of the gains from personal tax cuts announced will go to the richest fifth of households: Almost half (45%) will go to the richest 5% alone, while just 12% of the gains will go to the poorest half of households.
5 – Caution needed on growth: While energy support will boost GDP this winter, the borrowing required will also mean higher interest rates. Growth in the years ahead is likely to be driven far more by the path of energy prices than the tax cuts announced today.
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There are rumours that the Government is looking to cut the benefits bill as it tries to reduce public spending.
But has there been a huge rise in welfare spending in recent years? A quick thread👇
Social security spending rose by around 1% of GDP from the eve of the financial crash to last year, driven by rising spending on the State Pension and non-pensioner health-related benefits.
A rise yes, but hardly ‘huge’. So, is the problem rising welfare spending in the future?
The @DWP forecast is in fact for welfare spending to stay flat as a proportion of GDP from now until 2029-30, with forecast rises in spending on health-related benefits offset by the rollout of around £3bn of planned cuts to other non-pensioner benefits.
Earlier today the justice secretary pointed to a “huge rise in the welfare budget” as justification for benefit cuts to reduce public spending. So, how big has the rise in welfare spending been? 🧵
Social security spending rose by around 1% of GDP from the eve of the financial crash to last year, driven by rising spending on the State Pension and non-pensioner health-related benefits.
A rise yes, but hardly ‘huge’. So, is the problem rising welfare spending in the future?
The @DWP forecast is in fact for welfare spending to stay flat as a proportion of GDP from now until 2029-30, with forecast rises in spending on health-related benefits offset by the rollout of around £3bn of planned cuts to other non-pensioner benefits.
Since 1997 earnings have doubled, while house prices have increased *4.5 times*.
Our Research Director Lindsay Judge spoke to @BBCr4today this morning about the state of British housing 🏡🧵
Our current housing crisis is decades in the making.
The UK is not alone in considering itself in the midst of a crisis, but our cramped and ageing housing offers the worst value for money of any advanced economy.
Looking at 'imputed rents' of homeowners as well as actual rents, we spend more on housing than almost every other rich country.
Back for more? - the Resolution Foundation overnight analysis of the 2024 Spring Budget is out now!
To whet your appetite ahead of reading the full report, here's a six-chart thread with a few of the key highlights....
⬇️⬇️⬇️resolutionfoundation.org/publications/b…
1) Filling out the tax sandwich.
A net tax cut of £9 billion is taking effect in the election year. But this is dwarfed by the estimated £27 billion of tax rises that came into effect last year (2023-24) and the £19 billion that are coming in after the election (2025-27).
2) Shifting state support from the rich to the poor.
RF analysis of all major tax and benefit policies announced in this parliament show finds that typical households are set to gain £420 a year on average, while the poorest fifth gain £840 and the richest fifth lose £1,500.
Kicking off our event @_louisemurphy says that Britain has a youth mental health crisis. One-in-three 18-24-year-olds report having a common mental disorder, rising two-in-five young women.
This is having real-world impacts.
On health, more than half a million 18-24-year-olds were prescribed anti-depressants in 2021-22.
And on the labour market, people in their early 20s are now more likely to be economically inactive due to ill-health than those in their early 40s. This is a big shift over the past 25 years...
The chancellor has gone for broke on pre-election giveaways. Meanwhile, households are broke, after getting £1,900 poorer over the course of this parliament.
💸 Pre-election tax-cuts today rest on implausible spending cuts tomorrow
💼Well-targeted policies to address tax system bias were welcome
✋As are steps to encourage business investment (but undercut by deeper cuts to public investment)
First up, some of the pain has been delayed.
The @OBR_UK shifted slow economic growth into the future.
The UK economy was more resilient than expected this year (growth revised ⬆️from -0.2% to 0.6%), but things look worse next year (growth revised ⬇️from 1.8% to 0.7%).