IFS warns new GDP and tax receipt forecasts will be revised downward
The UK’s budgetary watchdog is expected to next week downgrade its forecasts for future GDP growth and government tax revenues, according to the head of the influential Institute for Fiscal Studies (IFS) think tank.
IFS director Paul Johnson said today that Rishi Sunak’s spending plans from the October budget will now be “worth an awful lot less” due to the economic hit of rising energy prices and economic disruption caused by the Russo-Ukrainian war.
Sunak will unveil a mini-budget during his spring economic statement on Wednesday, which will come alongside new economic forecasts from the Office for Budgetary Responsibility (OBR).
It comes as the Consumer Price Index (CPI) increased by 5.5 per cent in the 12 months to January – a 30-year-high – and after the UK has hit Russia with wide-ranging economic sanctions in response to Vladimir Putin’s invasion of Ukraine.
Sunak today said the measures taken would have a negative effect on the British economy.
Speaking to Times Radio, Paul Johnson said Sunak’s statement would be constrained by this reality.
“There’s more cash coming in through tax receipts now, but what really matters is what the OBR says about future receipts,” he said.
“Theyre’ going to be lower than [Sunak] was expecting now. That also means he’s going to be spending less in real terms on hospitals, schools and police than he intended because he set out his cash plans in October and they’re now worth an awful lot less.”