London Daily

Focus on the big picture.
Saturday, Jul 05, 2025

Elephants in Sunak’s Budget Room: Overlooked Problems May Disrupt UK Economic Growth, Observers Warn

Elephants in Sunak’s Budget Room: Overlooked Problems May Disrupt UK Economic Growth, Observers Warn

While vowing to bring the UK economy back on track to prosperity via new budget measures, the BoJo government appears to overlook certain challenges which may hinder the growth and create new problems in the future, warn British academic Dr Renaud Foucart and BIRA CEO Andrew Goodacre.

Chancellor of the Exchequer Rishi Sunak on Wednesday delivered his Budget in the House of Commons. The newly proposed measures include cuts to the Universal Credit taper rate, bringing it down from 63% to 55%; a 50% business rates discount for the retail and leisure sectors in England; a freeze on fuel duty; more funding for schools; and even taking three pence off the price of a pint of beer, to name but a few.

Sunak asserted to British lawmakers that the UK economy had not been damaged as hard as had been previously expected, projecting that it would return to pre-COVID levels in 2022, and set a goal to increase the National Living Wage next year by 6.6%, to £9.50 ($13.08) an hour.

Major Policy Changes


The UK government's policy changes aimed at boosting the UK economy will bring challenges too, according to Dr Renaud Foucart, senior lecturer at Lancaster University Management School.

First, the government has made a "big move in favour of low earners" by reducing the Universal Credit taper rate. The Universal Credit is a monthly (or bi-monthly) payment to help low-income or jobless people with their living costs. The UC taper rate determines the amount of money taken from a claimant's payment for every one pound that he or she earns. Currently, this rate stands at 63% which means that for every pound UC claimants get for their job, 63p is deducted from their Universal Credit payment.

"In the previous system, they were by far facing the highest marginal tax rate in the economy; as Universal Credit transfers decrease when income rises", Foucart explains. "This marginal tax rate will be considerably lower, down to 55%. Universal Credit recipients still keep less than half of each additional pound they earn, however".

At the same time, "those not able to work are made considerably worse off", the academic warns. "The £20-a-week cut in Universal Credit, combined with a forecast inflation of at least 4% means that in real terms they will be much poorer", Foucart points out, adding that this includes people who are sick or disabled for instance.

Second, the Boris Johnson government is addressing what it considers to be priorities of their voters by, for example, lowering the cost of a pint in the pub or lowering – in real terms – the fuel duty for car drivers, he continues.

However, the problem of pubs is not low demand at the moment, but a difficulty to find staff in the wake of Brexit, which already leads many of them to reduce their offer, according to the academic. Meanwhile, the lower fuel duty as well as a decrease in tax for short-haul flights comes in contradiction with the government's environmental goals set up only a few days ago, Foucart remarks.

Third, the BoJo Cabinet shifts focus to more public spending: "The Office for Budget Responsibility (OBR) estimates public spending in share of GDP will be the highest since the late seventies", the academic notes, stressing that the incumbent government does it "by very visibly reverting cuts from previous Conservative governments in education or the funding to local authorities".

Fourth, more spending usually comes with more taxes: "Different tax increases will lead to what the OBR forecasts to be the highest tax burden since the early 1950s", the economic expert observes. Still, he does not rule out that the government will keep taxes high in the medium run, "in order to be able to decrease them before the next election".

'2022 Will be More About Survival, Not Investments'


Meanwhile, there are elephants in the room the BoJo government prefers not to speak about, according to Renaud Foucart.

"What matters the most is maybe what is not in the budget: inflation is high, much higher than the Bank of England target", the academic says. "This means that everyone whose salary does not increase by at least 4% will be poorer next year, without even taking into account the tax rises".

In addition to that, the supply chain and labour scarcity problems remain massive, Foucart notes. This situation can only have two consequences, according to him: "either much higher salaries in specific sectors, increasing the prices for everyone else, or more imports of cheaper goods from abroad". And this might be a problem given the already weak UK manufacturing sector.

"Finally, the OBR releases together with the budget evaluation an update on the cost of the loss of trade from Brexit: much higher than the long run cost of COVID, a 4% drop in productivity", Foucart highlights. "How the UK compensates for this loss is still an open question and the very existence of this loss remains taboo for the current government".

British Independent Retailers Association (BIRA) CEO Andrew Goodacre shares the academic's concerns: "We believe more could have been done", he insists.

"This is especially true considering all the other inflation-busting increases such as wages, energy, supply chain, etc."

While the government measures are aimed at encouraging investments in the UK economy, the problem is that 2022 will be more about "survival", according to Goodacre.

"It will be a really difficult year for the high street and we hoped for more recognition of this to protect local communities, jobs and livelihoods", the businessman forecasts.

Newsletter

Related Articles

0:00
0:00
Close
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
Poland Implements Border Checks Amid Growing Migration Tensions
Political Dispute Escalates Between Trump and Musk
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
US Senate Votes to Remove AI Regulation Moratorium from Domestic Policy Bill
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
Jury Deliberations in Diddy Trial Yield Partial Verdict in Serious Criminal Charges
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
King Charles Plans Significant Role for Prince Harry in Coronation
Two Chinese Nationals Arrested for Espionage Activities Against U.S. Navy
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
×