Fiscal Theatre: Now Playing in Westminster
All the drama, none of the budget impact
🕯️Let me begin on a sombre note - Heartfelt condolences to everyone affected by the tragic air crash in Ahmedabad. Aviation has come a long way with technology, systems, and procedures making leaps in safety. Yet, incidents like this remind us that while risk may be reduced, it can never be eliminated. My thoughts and prayers are with the victims and their families. 🙏
🇬🇧 Spotlight: The UK Economy’s Numbers Game
After a flurry of fiscal announcements and leaks over the past two weeks, it feels like a good time to put the UK economy back under the spotlight.
Let’s start with the basics:
💰 Total UK Tax Receipts in 2023–24
£1.099 trillion (Source)
That’s trillion with a T (the character between S and U).
Remember that infamous £22 billion black hole?
That's just about 2% of total tax receipts.
📈 Those Contentious Tax Changes
You’ve heard about them - VAT on private schools, capital gains tweaks, dividend allowance cuts. Let’s see how much they actually raise:
Here’s how much revenue those tax changes actually raise:
VAT on private school fees:
Expected to bring in £1.6 -1.8 billion a year, or less than 0.2% of total tax receipts.Capital Gains Tax (CGT) increases and other capital tax reforms:
Around £1.7 billion in direct gains, and up to £6 billion annually if broader reforms are implemented - still just under 0.6% of receipts at full tilt.Abolishing the dividend allowance:
Generates a modest £300 million a year, which is less than 0.03% of annual tax revenues.Inheritance tax tweaks, non-dom changes, and land reforms:
These could raise £3–4 billion annually, adding up to less than 0.5% of the total tax take.
Collectively, these raise less than 1% of annual tax receipts.
Sources: OBR
📝 Angela Rayner’s Leaked Memo?
The total value of all tax measures proposed in that memo?
£4 billion per year.
That’s just < 0.4% of the tax base. Coverage
💸 Meanwhile… the Spending Plans
And now, for the other side of the fiscal equation:
📊 Public Spending Plan: £2+ Trillion through 2029
That’s two full years of tax receipts…
…planned to be spent over five years.
Maybe three exclamation marks aren’t enough here!!!
🛠 We’ve Swung the Tax Hammer - Now What?
So let’s recap:
We’ve raised taxes on schools, estates, investments, dividends.
All of that… gives us less than 1% of receipts.
Meanwhile, we’ve signed up to spend 200% of one year’s receipts over a five-year period.
Huh? What? What am I missing?
Does the maths make sense to you?
Not to me.
To spell it out - the declarations in spending review are nothing more than a use of smoke of mirrors to set out modest increases in spending. In any case, brace for more taxes - because clearly, more taxes needed to be raised, even if every one of the purportedly surgical tax increases lead nothing more than rounding-off error worth of increase in tax receipts. And this while this country’s economic growth continues to be challenged.
In case anyone thinks this is a political post - it isn’t - the previous Government had no better way of thinking about the economy, and it isn’t that there is a whole host of political parties waiting in line to help us make sense of the economy.
I want to be optimistic about the prospects of the UK, but that would need a leap of faith, than walking across a reasoned bridge between the present and the future.
That’s it. No grand thesis today - just a moment of fiscal clarity that I wanted to share.