UK government’s fiscal plans are not sustainable

Significance

Despite the short-term improvement in the fiscal position, the budget does not make major changes to macroeconomic policy or reverse planned tax increases. Instead, the government has introduced a variety of measures designed to boost labour supply and business investment.

Impacts

• Maintaining the Energy Price Guarantee (EPG) for another three months will reduce inflation and support households.
• The budget will do little to improve public support for the ruling Conservative Party.
• Lower wage growth and falling inflation means the Bank of England will likely stop raising interest rates earlier than expected.