The Office of Budgetry Responsibility (OBR) thinks UK economic production isn’t going to grow any faster, in the short term.
UK production hasn’t exactly been great the past 5 years: it’s averaged 0.2%.
That of course isn’t good.
It means tax receipts, particularly corporation tax, isn’t going to significantly increase anytime soon.
With public expenditure under pressure to rise and a budget on the way next month, we might see new taxes creeping in or even tax hikes, in order for the government to meet its deficit elimination plans.
But what’s caused this low growth rate?
Well, if you ask the Trade Union Congress (TUC), they’d say it’s down to limited public investment and austerity. They also point to the rise of the gig economy: that’s the name given to an economy or sector where short term, temporary, 0 hour employment contracts are the norm. Think delivery firms like Deliveroo or retailers like Sports Direct.
The OBR on the other hand point to low interest rates. They’ve allowed firms which normally would have gone insolvent to survive. Such companies have been more able to get hold of financing and have also been better equipt to pay off debt. Then they say corporate investment hasn’t been great. This suggests firms don’t have the economic confidence to splash the cash on new equipment, offices or pay rises.