UK has limited room for pre-election tax cuts, OECD says

The government of British Prime Minister Rishi Sunak has little room to cut taxes ahead of the next national election expected in 2024, the Organisation for Economic Co-operation and Development (OECD) said on Wednesday.

The OECD raised its growth projections for Britain’s economy in its latest set of forecasts for member countries, echoing a move last month by the International Monetary Fund which revised away a recession it had previously expected.

The Paris-based OECD said Britain’s growth would remain moderate and its inflation rate would be the highest among developed economies this year, pinching households and ramping up borrowing costs, before falling in 2024.

“Monetary policy will remain tight, increasingly weighing on output and lowering inflation, and the fiscal stance will be restrictive over 2023-24,” it said. “However, little fiscal space is left, leaving the government significantly exposed to movements in interest rates.”

Sunak and his finance minister Jeremy Hunt say they would like to cut taxes when possible – something many members of their Conservative Party want before a national election expected in 2024 – but their main priority is to halve inflation this year.

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