Wed, 26 Mar 2025

Wed, 26 Mar 2025 Taxes could still rise despite welfare cuts, economists warn

The chancellor is set to meet her financial rules, but her room for manoeuvre remains tight, leading to speculation over tax rises.
Experts say that with £9.9bn headroom, the chancellor has room to spare, but this is a low margin compared to previous years. The OBR halved its growth forecast for the UK from 2% to 1%, and experts predict that if global uncertainty intensifies, tax rises would be inevitable. The OBR also raised its inflation forecast to 3.2% this year and expects it to fall back to the Bank of England's target in 2027. Real household disposable income per person is expected to grow by an average of around 0.5% a year, but some are concerned about the impact of planned welfare cuts on disabled people. Economists warn that the UK's economic prospects are precarious and could easily be derailed, making tax rises likely in the autumn Budget. The chancellor has promised not to borrow to fund day-to-day spending, but with limited headroom, she may need to break her election promise and raise taxes for households. Key points:
* Global uncertainty due to US President Donald Trump's tariffs could hit the UK economy
* £9.9bn headroom is a low margin compared to previous years
* OBR forecasts 1% growth this year, down from 2%
* Inflation forecast raised to 3.2% this year
* Real household disposable income per person expected to grow by an average of around 0.5% a year
* Tax rises likely in the autumn Budget if global uncertainty intensifies
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