The looming recession set to befall the United Kingdom by the winter will last until at least 2024, according to analysts at Goldman Sachs, as economists for the Centre for Brexit Policy call for the next government to drastically reduce the tax burden in order to spur economic growth.
In a stark downgrade of future economic predictions, American multinational investment bank Goldman Sachs said that the British economy will continue to retract throughout all of 2023 after falling into a recession before the end of the year, meaning that the economy will have shrunk for two quarters in a row by that point.
The bank previously predicted that the UK economy would grow by 1.1 per cent next year, however, in a new research note, Goldman Sachs now believes that it will decline by 0.6 per cent throughout the entirety of 2023, The Times of London reported.
“Concerns around cost of living pressures in the UK have continued to intensify on the back of the worsening energy crisis. Real consumption is still likely to decline significantly,” said economist Sven Jari Stehn.
The UK is currently facing 10.1 per cent inflation, the highest level in 40 years. Yet, this will likely climb higher in October, when the Ofgem energy cap will be increased to £3,549 per year, with the Bank of England predicting at least 13 per cent. With energy prices expected to continue to rise, some have warned that inflation could hit 19 per cent.
Inflation began to rise last summer after lockdown restrictions were lifted, however, the continued inflation is mostly due to the spiralling energy crisis, which although impacted by the war in Ukraine, is also a result of poor economic planning and an overreliance on inefficient and expensive energy sources such as wind and solar rather than on reliable forms of energy.
In order to mitigate the economic woes facing the country, a report from the Centre on Brexit Policy called on the government which succeeds Prime Minister Boris Johnson’s administration in September to immediately cut taxes and introduce targetted spending measures.
The report, seen by Breitbart London, was compiled with the aid of Margaret Thatcher’s former economics adviser Professor Patrick Minford and former economic advisor to three Chancellors, Warwick Lightfoot. It said that the current frontrunner to replace Johnson, Foreign Secretary Liz Truss, has not offered bold enough solutions to encourage economic growth, rather merely promising to cancel planned tax hikes. Though Truss is reportedly considering a 5 per cent cut in VAT, no formal policy has been announced.
The authors said that the government should introduce a £100bn fiscal package, with £76 billion in cuts to the seventy-year high tax burden, including a 10 per cent cut to corporation taxes in order to give Brexit Britain a competitive edge over other nations. They went on to call for cutting income taxes for the vast majority of workers by five per cent to 15 per cent and abolishing the additional rate of income tax and cutting the higher rate to 30 per cent.
In addition, the Brexiteer think tank said that the government should look to increase spending on infrastructure and other public services essential for economic growth by £24 billion.
Contrary to claims from PM hopeful and former Chancellor Rishi Sunak — who has said that taxes should remain high to prevent further inflation and to pay off the massive debt accumulated during the lockdowns – the economists predicted that the £100bn fiscal package will in fact bring down the country’s debt to GDP ratio by 50 per cent by the end of the decade due to increased tax revenue collected as a result of higher economic growth.
” The Treasury Orthodoxy embraced by the Government up to now has sacrificed a tax system supporting growth to a policy of stopping new public borrowing,” former Thatcher advisor Professor Patrick Minford said.
“Yet solvent public finances are ensured by matching spending to revenues over the long term, not by short-term debt rules that prevent both optimal supply-side reform of taxation and a fiscal response to the business cycle that complements monetary control of inflation.
“Our aim here is to explain how both optimal tax reform and good fiscal policy can be taken forward at this critical moment for the British economy.”
Follow Kurt Zindulka on Twitter here @KurtZindulka
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