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Highlights:
- The Budget is expected to raise £35 billion in taxes from 2025 to 2030 and support £57 billion in public spending.
- Government borrowing is projected to increase by £22 billion, lifting the figure by 0.7% of GDP.
- The Budget could boost GDP growth by 0.3-0.4 percentage points and positively impact economic growth trends.
Next week’s Budget is anticipated to introduce £35 billion in tax hikes over the five-year period from 2025 to 2030, alongside a boost in short-term economic growth, according to analysts from Bank of America. The increase in taxes is expected to support an additional £57 billion in public spending over the same period, helping fund new investments and public services.
The bank also projected that the UK government will borrow an additional £22 billion to finance these plans, raising government borrowing by 0.7% as a proportion of gross domestic product (GDP) compared to previous estimates in March.
Chancellor Rachel Reeves’ Budget statement is forecast to add between 0.3 and 0.4 percentage points to GDP growth in the short term, positioning the Budget as a net positive for economic growth relative to earlier forecasts from March.
Bank of America noted that the Budget could serve as a critical step towards improving the UK’s long-term economic trend growth. The anticipated boost to public spending and reduced fiscal tightening is also expected to influence the Bank of England’s monetary policy, potentially leading to a more cautious approach to cutting interest rates.
The combination of increased public investment, tax hikes, and a reduction in fiscal tightening is seen as a move towards stabilizing the economy and fostering growth as the UK navigates ongoing economic challenges.
