UK Budget Analysis
The new government has implemented a tax package expected to raise £40 billion-equivalent to over 1% of GDP-through changes such as increased National Insurance contributions (NICs), tightening inheritance tax exemptions, and reducing private equity carried interest tax breaks. Combined with an additional £30 billion in borrowing, the measures aim to fund £70 billion in government spending. However doubts remain about whether these policies can deliver the needed boost to growth and confidence.
The NIC increase, particularly for employers, is set to raise labour costs, discouraging hiring and potentiall leading to reduced investment or workforce reductions. These impacts are likely to weaken consumer spending and exacerbate challenges in the labour market. While approximately one-third of the planned spending increase is allocated to infrastructure, the lack of detailed plans for housing, energy, skills, and transport investment clouds its potential effectiveness. Outside London, public transport systems highlight the urgent need for funding, with South Yorkshire’s bus network shrinking by 42% over the past decade
