UK's ?10 Billion Tax Cut Measures Still Result in "Highest Burden on Citizens"

Snack UK Prime Minister
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Despite the recent announcement of an additional ?10 billion (approximately 17 trillion KRW) tax cut measure by the UK Conservative government, concerns have been raised that the national tax burden will reach an all-time high in the future. With a general election scheduled for the second half of this year, some have voiced opposition, claiming that such predictions carry political intentions.

According to a report by Bloomberg on the 7th (local time), the UK’s Office for Budget Responsibility (OBR), the budget watchdog, projected that the tax-to-GDP ratio in the UK will increase to 37.1% by 2028, marking the highest level since 1948. Before the COVID-19 pandemic, in 2019, it was 33.1%.

This forecast drew attention as it came after the Sunak government announced a ?10 billion (approximately 17 trillion KRW) annual tax cut plan in the spring budget. The Sunak administration has announced plans to reduce the National Insurance (NI) contribution rates by 2 percentage points for employees and self-employed individuals starting next month. Analysts interpret this as a political gamble by the Sunak government, which is struggling with low approval ratings ahead of this year’s general election. The Conservative Party recently recorded an all-time low approval rating of 20% in opinion polls.

However, the OBR poured cold water on this by stating that despite the tax cuts, the taxes borne by the public will increase. The OBR pointed to Brexit as a major factor. The OBR explained, “Long-term forecasts that domestic trade volume and potential productivity will decrease by 15% and 4%, respectively, compared to if the UK had remained in the European Union, are generally on track.”

The OBR also noted that the UK’s trade volume has not recovered as much as other G7 countries (United States, Japan, Germany, UK, France, Italy, Canada) since the COVID-19 pandemic. The UK’s trade intensity (degree of trade concentration) was 1.7% lower than pre-pandemic levels through the third quarter of 2023, whereas the rest of the G7 saw a 1.7% increase during the same period.

Bloomberg reported that some Conservatives and others reacted negatively to the OBR’s announcement. However, Bloomberg added, “The OBR’s analysis is not significantly different from the Bank of England’s (BOE) perspective, which highlights the long-term pressure on the country’s economic potential.” The BOE announced last year that Brexit caused an average loss of ?1,000 per UK household.

This content was produced with the assistance of AI translation services.