1 Executive summary Overview

There could be pressure to: provide further support for households in the event of another large rise in the energy price cap in October; address the 5 per cent fall in the real value of welfare benefits in 2022-23; or cancel next year’s fuel duty super-indexation that would raise petrol prices 6 per cent overnight and be the first duty increase in 12 years. [...] Those net tax rises, plus the more tax-rich composition of economic activity that has been factored into this forecast, raise the tax burden from the 33.0 per cent of GDP recorded in 2019-20 15 Economic and fiscal outlook £ billion Executive summary to 36.3 per cent of GDP in 2026-27 – its highest level since the late 1940s.2 This 3.3 per cent of GDP increase in the tax burden in the space of seve. [...] Economic and fiscal outlook 16 Per cent of GDP Executive summary 1.26 Public spending is on a declining path as a share of GDP throughout the forecast period, though it settles at 41.1 per cent of GDP in 2026-27, 2.1 per cent of GDP higher than in 2019-20 and the highest sustained level since the late 1970s. [...] The improved fiscal outlook means the Government has a little more headroom against these targets than we predicted in October: • The fiscal mandate to have public sector net debt (excluding the Bank of England) as a share of GDP falling by the third year of the rolling forecast period (currently 2024-25) is met by a margin of 1.0 per cent of GDP (£27.8 billion), a 0.4 per cent of GDP (£10.3 billi. [...] 1.30 More broadly, the modest improvement in headroom needs to be set against the elevated risks to the economic and fiscal outlook, with the Russian invasion of Ukraine the latest in a series of global shocks in the first quarter of this century.