Latest news with #OfficeForBudgetResponsibility
Times
a day ago
- Business
- Times
OBR admits overly optimistic forecasts — raising chance of a downgrade
Rachel Reeves is facing mounting pressure before the autumn budget after the fiscal watchdog said it had been too optimistic about its economic forecasts. The Office for Budget Responsibility said that it had overestimated growth by an average of 0.3 percentage points over two-year periods and 0.7 points over five years. It also said that it had been too pessimistic about its immediate one-year projection by 0.4 percentage points. The forecaster said that it would review how it assessed the potential effects of government policies such as planning reforms, along with the effect of trade. It raises the prospect that the forecaster will downgrade the economic forecasts before the autumn budget, increasing the likelihood that Reeves will have to raise taxes to balance the books. The chancellor has left herself with £9.9 billion of fiscal headroom, effectively spare money, before the budget. The government's succession of policy reversals, on winter fuel payments and welfare, threaten to wipe out more than £6 billion of her headroom. A downgrade in the economic forecasts would effectively push the public finances into the red. Estimates from experts suggest that a 0.2 per cent reduction in output would cost Reeves as much as £12 billion. • How accurate are OBR forecasts? It has been wrong before The OBR said: 'We will take stock of the lessons that we have learnt from our approach to capturing the impact of government policy measures on our forecast for potential output.' The watchdog said that it would also review how it costs supply-side measures such as housing plans and trade. 'We will also review our experience to date in estimating the supply-side effects of policy,' an evaluation report by the OBR said. In March, the OBR said reforms to the planning system would increase GDP by 0.2 per cent by 2030. The report added: 'We intend to refine how we construct … our housing supply forecast, in light of the large increase in housing supply that we expect to occur in response to the government's planning reforms.'
Bloomberg
a day ago
- Business
- Bloomberg
UK Budget Watchdog Admits to Optimism Bias in New Blow to Reeves
Britain's fiscal watchdog said it has been too optimistic about the country's medium-term growth prospects and promised a full evaluation of the economy's speed limit over the summer in what will be a crucial moment for Chancellor of the Exchequer Rachel Reeves. In its latest forecast evaluation report, the Office for Budget Responsibility found that it overestimated growth by an average of 0.3 percentage points at the two-year horizon and by 0.7 points after five years. On a cumulative basis over five years, the overshoot has been 2.2 points on average.
The Guardian
3 days ago
- Politics
- The Guardian
Dear PM, thanks for the welfare concessions, but I still won't vote for your bill. Scrap the whole thing
In the face of growing opposition, the government finally stopped ignoring the warnings from its own backbenchers and made changes to its disability benefits bill. No one doubts these concessions are welcome. But the real question is whether they go far enough. For me and many of my Labour colleagues, the answer is clear – they don't. At best, these concessions make a terrible bill slightly less bad. But the bill still represents a devastating attack on disabled people. It still strips billions in support from those who need it most, still forces huge numbers into poverty, and still undermines the dignity and independence of disabled people. As an example of just how cruel these cuts still are, MPs will be asked to vote on Tuesday for a bill that will take away essential support from disabled people who will need help with basic daily tasks such as cutting up food, washing themselves or using the toilet. If these cuts go ahead, approaching half a million disabled people will lose their personal independence payments between the end of next year and 2030. On average, they will lose £4,500 a year – about £100 a week. That's a life-changing reduction for people who rely on Pip to help with the extra costs of disability, including the one in six Pip recipients who are in work, according to the Office for Budget Responsibility. On top of that, there are deep cuts to the universal credit health component for low-income sick and disabled people. Three-quarters of a million new claimants will be forced on to a rate that's half the current level and be left £3,000 a year worse off. For people already struggling to make ends meet, this is not just a cut – it's a catastrophe. And how can it be right that someone who would qualify for support today would be denied it simply for becoming disabled after next November? Do we really want a two-tier system where future generations of disabled people receive less support than disabled people today? Especially when already three in four of those using food banks are disabled themselves or live with someone who is. All this flies in the face of what should be a key purpose of every Labour government: to lift people out of poverty, not push them further into it. It's no wonder that disabled people's organisations, including Labour's own affiliate Disability Labour, remain so firmly opposed to this bill. Of course, ministers have been sent out to claim that these changes are all about helping people. But if you cut billions in essential support to disabled people, you cannot then sincerely claim to be helping them. The truth is these changes are driven by the desire to make savings. Even after the concessions, the majority of the original cuts planned are still in the bill – totalling a staggering £3.5bn. Sadly, the government has made a deliberate choice to balance the books on the backs of disabled people instead of pursuing the much more Labour option of taxing those with the broadest shoulders. So many fairer alternatives exist. As an example of one of them, I will be presenting a petition in parliament on the eve of the vote, already backed by more than 75,000 people, calling for a wealth tax. Such a tax of just 2% on assets over £10m could raise £24bn a year – over six times more than the government's so-called savings from these cuts. It would also be popular, with one recent poll showing that two-thirds of people support tax increases on the super-rich. It's a policy that would place Labour firmly on the right side of public opinion – something the government has struggled with in its first year. As we count down to Tuesday's vote, there will be increasing pressure on MPs to fall into line, accept the concessions as sufficient and back the bill. But the question MPs need to ask themselves isn't whether this bill is better than it was before the concessions. It's whether this bill will leave disabled people worse off than they are now. The answer is obvious. That's why I will vote against it. And that's why I am calling on the government to withdraw the bill entirely. The government has treated this as a political problem to be solved before Tuesday's vote. But it's an artificial deadline. Why not postpone the vote and then use the next few months to get this right? Working with disabled people, we could design a welfare system that is fair and compassionate, that recognises the barriers disabled people face and provides the support they need to live full, independent lives. As we mark one year of Labour in government, this is about our values – and the kind of country we want to build. Richard Burgon is the MP for Leeds East and secretary of the Socialist Campaign Group of Labour MPs One year of Labour, with Pippa Crerar, Rafael Behr and more On 9 July, join Pippa Crerar, Rafael Behr, Frances O'Grady and Salma Shah as they look back at one year of the Labour government and plans for the next three years
The Sun
5 days ago
- Business
- The Sun
How to legally pay less tax on your income as millions hit with stealth taxes
MILLIONS of workers will be hit with higher tax bills in the coming years as frozen thresholds will force them to hand over more of their earnings to the taxman. Around 4.1million extra workers will be dragged into higher tax bands by 2027-28, according to the most recent figures from the Office for Budget Responsibility. 1 Income tax thresholds are frozen until April 2028, which means that more people could find themselves pushed into higher tax bands through a concept called fiscal drag. The higher rate tax band is frozen at £50,270, which means any earnings over this amount are taxed at 40%. Meanwhile, the additional tax band is currently fixed at £125,140, beyond which any earnings are taxed at 45%. But there are things you can do to prevent a surprise tax bill from landing on your doorstep. Here we explain how you can reduce your tax bill and avoid the tax trap. Apply for tax relief One way to reduce your tax bill is to claim tax relief. You can claim the relief on your job expenses, which means you will take home more of your income and pay less tax. To be eligible you must use your own money for things that you need to buy for your job and you only use for work. You can claim for items including working from home, uniforms, work clothes, tools, vehicles you use for work, travel and overnight costs. You cannot claim tax relief if your employer gives you all the money back or alternative equipment. You will get the relief based on what you have spent and the rate at which you pay tax. For example, if you claim £60 of tax relief and usually pay tax at 20% then you will get £12 back. The exact amount you could get depends on what you are claiming for. For more information and to make a claim visit How do I check my tax code? YOU can check your tax code on your personal tax account online, on any payslips or on the HMRC app. To log in, visit If you have one, you can also check it on a "Tax Code Notice" letter from HMRC. Bear in mind that you might need your Government Gateway ID and password to hand to log in. But if you don't have this you can use your National Insurance number or postcode and two of the following: A valid UK passport A UK photocard driving licence issued by the DVLA (or DVA in Northern Ireland) A payslip from the last three months or a P60 from your employer for the last tax year Details of a tax credit claim if you have made one Details from a self assessment tax return (in the last two years) if you made one Information held on your credit record if you have one (such as loans, credit cards or mortgages) Claim marriage allowance If you are married or in a civil partnership then you may also be able to reduce your tax bill by claiming Marriage Allowance. Every worker has something called a Personal Allowance. This is the amount of money you can earn every financial year before you start to pay Income Tax. For the current tax year the Personal Allowance is £12,570. If you earn less than this then you usually do not have to pay Income Tax. Marriage Allowance is a special tax rule that lets you transfer £1,260 of your Personal Allowance to your husband, wife or civil partner. It is free to apply for and can reduce your tax bill by up to £252 every tax year. To be eligible you need to be married or in a civil partnership. Your income must be below £12,570 and your partner must pay Income Tax at the basic rate, which usually means their income must be between £12,571 and £50,270. Ian Futcher, financial planner at Quilter, said: 'Many eligible couples haven't claimed this, often because they simply don't realise it exists. 'It can be backdated for up to four years if you're eligible.' The fastest way to apply for the allowance is online and you should get an email confirming your application within 24 hours. You can also claim Marriage Allowance by post using the MATCF form. For more information visit Make use of salary sacrifice Salary sacrifice is a great way to top up your income without paying any tax. It lets you exchange some of your wages for a different benefit from your employer, such as a company car, childcare vouchers or pension contributions. Your salary is then reduced by the cost of any benefits you choose. As your salary is lower, you will pay less tax and National Insurance. For example, someone who earns the UK average salary of £37,430 could decide to sacrifice £200 a month into their pension. Over the course of a year they would pay £2,400 into their pension. By using salary sacrifice their wage would fall to £35,030 a year, which would save them around £480 a year in Income Tax. They would also save nearly £200 in National Insurance, which means their total saving would be £672. Salary sacrifice also saves your employer money on National Insurance. Many employers will pass this saving on to you by paying more money into your pension. As a result, your total pension contribution could be more than £2,700. Sarah Coles, head of personal finance at Hargreaves Lansdown, said it is worth checking if your employer offers salary sacrifice. She said: 'It will not boost your take-home pay, but it will cut your tax bill and make your money go further.' Pay into pension If you are lucky enough to earn more than £60,000 a year then you may be able to get more Child Benefit with an under-used trick. Child Benefit is paid by the government to parents or other people who are responsible for bringing up a child. It is currently worth £26.05 for the eldest or only child and £17.25 for every additional child you have. You get this full payment if you earn less than £60,000 a year. But beyond this point you need to start paying the benefit back at a rate of 1% for every extra £200 you earn. The payment disappears entirely once you earn more than £80,000 a year. But you may be able to hang on to more of your Child Benefit with a simple trick, Ian Futcher explains. He said: 'If your earnings are close to the threshold, using pension contributions or salary sacrifice to reduce your taxable income could allow you to keep more of your Child Benefit.' For example, if you earned £61,000 a year then paying £1,000 into your pension would allow you to keep all of your Child Benefit. .
Yahoo
5 days ago
- Business
- Yahoo
What does the UK spend on welfare – and how much will it rise?
Welfare spending is forecast to rise sharply over the next few years, driven by the UK's ageing population and an increase in the number of people receiving health and disability benefits. Here, the PA news agency looks at the latest figures and projections for social security and welfare expenditure. – How much does the UK spend in total? The Government is forecast to have spent £313.0 billion on welfare in 2024/25, according to the Office for Budget Responsibility (OBR). This is the equivalent of 10.9% of UK GDP (gross domestic product, or the total value of the economy). The OBR forecasts annual spending on welfare to reach £373.4 billion in 2029/30. This is up £60.4 billion on the figure for 2024/25 – an increase of nearly a fifth. Welfare spending as a proportion of GDP is forecast to fall slightly to 10.8%, however. – What takes up the biggest share of the welfare budget? Spending on pensioners. Some £150.7 billion was spent on pensioners in 2024/25, accounting for nearly half (48%) of the total welfare budget. Besides the state pension, this spending also includes pensioner housing benefit, pension credit and the winter fuel payment. Spending on pensioners is forecast to reach £181.8 billion by 2029/30, but this would still be just under half (49%) of the full welfare budget. – How does the rest of the welfare budget break down? The next largest chunk of spending goes on Universal Credit, which made up 28% of the 2024/25 budget (£87.8 billion). It was followed by disability benefits at 13% (£41.4 billion) and child benefit at 4% (£13.3 billion), with other types of spending – including social security in Northern Ireland – accounting for 6% (£19.9 billion). – Is spending set to increase for all types of welfare? No. The child benefit budget is forecast to remain largely flat, at £13.6 billion in 2029/30, compared with £13.3 billion in 2024/25. By contrast, spending on disability benefits is forecast to jump to £56.3 billion by 2029/30, up from £41.4 billion in 2024/25. Spending on Universal Credit will reach £99.0 billion, up from £87.8 billion. – Why is welfare spending rising? The OBR identifies two main drivers of the increase. The first is higher spending on pensioners. This is because of the UK's ageing population and the 'triple lock', which guarantees pensions will rise each year by whichever is highest: the annual rate of inflation, average growth in earnings, or 2.5%. Of the forecast £60.4 billion extra spending on welfare in 2029/30, pensioners are responsible for just over half of the amount, at £31.3 billion (51%). The second factor identified by the OBR as driving an increase in welfare spending is the rise in people eligible for health and disability benefits. Spending on disability benefits, which includes disability living allowance and personal independence payments, accounts for £14.9 billion (25%) of the £60.4 billion extra spending on welfare in 2029/30. – How does spending on health and disability benefits break down by age group? The OBR defines health and disability benefits as covering the following entitlements: the standard allowance and health element spending for Universal Credit claimants; employment and support allowance; incapacity benefit; severe disablement allowance; income support for incapacity; disability living allowance; personal independence payment; attendance allowance; spending on the Universal Credit carer's element; carer's allowance, and income support for carers. Spending on all these benefits was estimated to be £75.7 billion in 2024/25, three-quarters of which (75% or £56.9 billion) went to working-age adults. Just under a fifth (19%, or £14.2 billion) went to pensioners, while 6% (£4.5 billion) went to children. Although the amount spent on health and disability benefits is forecast to rise to £97.9 billion in 2029/30, the proportions are expected to remain broadly the same: 74% on working-age adults (£72.3 billion), 19% on pensioners (£18.3 billion) and 7% on children (£7.0 billion). – How does welfare spending compare with other government departments? In 2023/24, actual spending on health and disability benefits was £66.3 billion. This was more than than the total departmental expenditure on defence (£57.6 billion) or transport (£32.6 billion), but well below the figure for education (£127.0 billion) and overall health and social care spending (£196.7 billion), according to the latest Treasury data. Total expenditure by the Department for Work & Pensions stood at £275.1 billion in 2023/24, up from £239.1 billion in 2022/23 and the highest figure among all government departments.
