Budget 2021:Chancellor Rishi Sunak Inflation likely to rise further
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Established to provide independent economic forecasts and independent analysis of the public finances, the Office for Budget Responsibility (OBR) released a statement on Wednesday following the Chancellor’s 64-minute speech. According to the OBR, the increase in corporate and personal taxation announced would leave the overall tax burden at its highest since the final period of Clement Attlee’s post-war administration 70 years ago.
The OBR said the changes announced by Mr Sunak amounted to a “significant discretionary increase in both the tax burden and the size of the post-pandemic state”.
To justify the high spending and raise of taxes, Mr Sunak told MPs: “Employment is up.
“Investment is growing.
“Public services are improving.
“The public finances are stabilising.
“And wages are rising.
“Taxes are rising to their highest level as a percentage of GDP since the 1950s.
“I don’t like it, but I cannot apologise for it, it’s the result of the unprecedented crisis we faced and the extraordinary action we took in response.
“By the end of this Parliament, I want taxes to be going down, not up.”
When the Conservatives took power in Coalition in 2010, taxes accounted for one-third of GDP.
However, OBR forecasts tax as a share of GDP hitting 36.2 percent – the highest since 1951 – after fresh tax rises amounting to £16.7bn a year by 2026-27.
The Chancellor was given some leeway for greater spending as a result of an improved economic outlook, with the OBR predicting the economy will return to its pre-Covid level at the turn of the year.
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The economy is forecast to grow 6.5 percent this year instead of the four percent expected in March.
Shadow chancellor Rachel Reeves was revolted by Sunak’s strategy.
She said in a statement: “As he hits working people with the highest sustained tax burden in peacetime, he’s giving a tax cut to bankers who like to take short-haul flights while sipping Champagne.
“After taking £6 billion out of the pockets of some of the poorest people in this country, he is expecting them to cheer today at being given £2 billion to compensate.”
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