TaxPayers’ Alliance forecasts £30 billion hit to UK economy due to budget

For immediate release

There will be a £30 billion hit to GDP as a result of Rachel Reeves’ first budget as Labour chancellor, with wages set to be £337 lower and growth down by 0.1 percentage points after ten years, according to modelling by the TaxPayers’ Alliance

As a result of the tax changes made by the chancellor, the tax burden is set for a record high as a percentage of GDP. But while Reeves claims these tax hikes will raise £40 billion of revenue, dynamic modelling of the effects of these tax changes estimates that 43 per cent of this additional revenue will be lost by a reduction in overall receipts. This equates to £15.6 billion of lost receipts, with £36.6 billion expected to be raised after ten years.

The TPA model is inspired by modelling previously published by HM Treasury in 2013, which forecasted the dynamic impact of cutting corporation tax rates on investment, wages, employment and prices. It showed increased investment, profits, wages, consumption and tax revenue.

Responding to the budget earlier, John O’Connell, chief executive of the TaxPayers' Alliance, said:

"We were consistently told that there was no need for big tax hikes because of a focus on growth, so taxpayers will be disgusted by the whoops and cheers of Labour MPs celebrating the fact that Rachel Reeves has just condemned the country to a record high tax burden.

"Given wider global uncertainties the stakes are incredibly high, yet we've doubled down on disastrous managerialism and decline. That means growth will flatline over the next five years, which is unsurprising given the assault on aspiration and wealth creation we've just witnessed.

"If the government ever wants to regain the trust of taxpayers it will need to rapidly find a way to halt the growing tax burden."


TPA spokespeople are available for live and pre-recorded broadcast interviews via 07795 084 113 (no texts)


Media contact:

Elliot Keck
Head of Campaigns, TaxPayers' Alliance
[email protected]
24-hour media hotline: 07795 084 113 (no texts)


Notes to editors:

1. Founded in 2004 by Matthew Elliott and Andrew Allum, the TaxPayers' Alliance (TPA) campaigns to reform taxes and public services, cut waste and speak up for British taxpayers. Find out more at www.taxpayersalliance.com.
   
   
2. TaxPayers' Alliance's research council.
   
   
3. The TaxPayers’ Alliance dynamic tax model was created by Europe Economics, and is a modified Ramsey-Cass-Koopmans model. More information is available here.
   
   
4. The 2013 HM Treasury modelling, Analysis of the dynamic effects of Corporation Tax reductions, can be found here.
   
   
5. For full reaction from the TPA to the budget, listen to the latest episode of our podcast, a nation of taxpayers.