A prominent thinktank has warned that the incoming government will need to implement post-election tax increases and potentially postpone investments in achieving net zero emissions unless it is willing to reconsider the Treasury's financial management regulations.
The National Institute for Economic and Social Research (Niesr) advocated for a significant restructuring of the self-imposed limitations on government borrowing and debt.
It cautioned that ongoing sluggish growth and reduced inflation would pose challenges in adhering to these regulations. In its quarterly assessment, the thinktank noted that while the economy had rebounded from recession, the current fiscal rules were deemed inadequate, leaving no room for Jeremy Hunt to propose new tax cuts ahead of the upcoming elections.
After the general election, Niesr said a future chancellor would be faced with a choice: raise taxes to maintain the existing provision of public services or rewrite the rules so that they served the UK’s medium- and long-term needs and objectives – including raising the growth rate, levelling up the regions and greening the economy.
Niesr anticipated a 0.4% increase in output during the initial three months of 2024. However, for the entirety of 2024, it revised its growth projection slightly downward from 0.9% to 0.8% compared to its forecast three months earlier.
