Does a £40bn “funding gap” mean £40bn of tax rises?

The Chancellor’s £40bn “funding gap” doesn’t mean that the Budget on 30th October will involve £40bn of tax rises. Some of this “funding gap” will probably be paid for with higher borrowing and some of it will probably be covered by spending cuts. The upshot is that we think net spending on public services might increase by about £25bn a year in 2029/30 and that taxes may rise by £25bn to pay for it. Together with an £18bn increase in public investment funded by more public borrowing, the Budget will mean fiscal policy is not as tight as previously planned.

We will be discussing what the policies announced in the Budget mean for the economy and the financial markets at 3pm GMT on Wednesday 30th October (register here).