Funding fair growth - How to transform the UK economy October 2023

Funding fair growth: how to transform the UK economy 9 Redesign the UK’s fiscal rules to support fair and sustained economic growth while increasing the role and accountability of the OBR (Office of Budget Responsibility) as an independent watchdog to bolster the UK’s fiscal credibility. [...] The global financial crisis, the COVID-19 pandemic and the ripple effects of the Russo-Ukrainian war have laid bare the fragility of the country’s economic system. [...] Based on expected values for GDP, demography and wages, we project such a large deficit to be the norm over the next six years – with the deficit in 2030 still £135bn (with a potential range of between £90bn and £180bn).16 Total revenue is projected to be over 40% of GDP throughout the period up to 2030.17 Our projections for spending, reveal the likely scale of the public finance challenge facing. [...] To give a rough estimate of how high taxes would need to rise to put the UK on a surer fiscal footing, we calculate what taxes would need to be to bring the deficit down to 2.8% of GDP in 2030 – similar to the level before the pandemic.21 In order to achieve this, and assuming all else equal, tax as a proportion of GDP would need to rise from 36.5% today to 38.8% in 2030. [...] In the following chapters, we explore some of the ways that the government could fund this increase in public spending through changes to the tax system and to the rules governing public spending at national and local level, including through greater devolution.