{"id":243917,"date":"2025-11-04T20:00:06","date_gmt":"2025-11-04T20:00:06","guid":{"rendered":"https:\/\/www.newsbeep.com\/uk\/243917\/"},"modified":"2025-11-04T20:00:06","modified_gmt":"2025-11-04T20:00:06","slug":"why-does-lower-uk-productivity-mean-tax-rises-are-more-likely","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/uk\/243917\/","title":{"rendered":"Why does lower UK productivity mean tax rises are more likely?"},"content":{"rendered":"

Productivity is the amount of goods and services the entire UK economy produces for each hour of work done by everyone in the working population, also known as “output per hour”.<\/p>\n

It gives an indication of how efficiently a country’s economy is using its workforce and equipment to produce these goods and services – and so how productive a country is.<\/p>\n

A country with higher levels of productivity often has higher average wages and incomes.<\/p>\n

In the Spring Statement in March 2025 the OBR projected total UK productivity, external<\/a> would grow by around 1% each year over the next five years.<\/p>\n

If productivity grows more slowly it means overall GDP growth – and overall tax revenues – will be lower than previously expected.<\/p>\n

The Institute for Fiscal Studies (IFS) think tank has estimated, external<\/a> each 0.1 percentage point downgrade in the official productivity growth forecast increases projected government borrowing by \u00a37bn in 2029\u201330.<\/p>\n

That is the year when the government’s chosen borrowing rules require it to balance day-to-day spending with tax revenues, essentially so it’s not borrowing for anything except investment.<\/p>\n

So if the OBR downgraded its forecast for average UK productivity growth over the next five years from 1% to 0.8% (-0.2 percentage points) that revision would increase projected borrowing in 2029-30 by \u00a314bn.<\/p>\n

In March, the chancellor gave herself “headroom” against meeting her borrowing rules in 2029-30 of only \u00a39.9bn. In other words, this was the leeway between meeting and not meeting her rules.<\/p>\n

That means an OBR productivity forecast downgrade of 0.2 percentage points (\u00a314bn) would, on its own, wipe away this headroom, pushing the government into a projected deficit in that year.<\/p>\n","protected":false},"excerpt":{"rendered":"Productivity is the amount of goods and services the entire UK economy produces for each hour of work…\n","protected":false},"author":2,"featured_media":243918,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[84,1294,56,54,55],"class_list":{"0":"post-243917","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-business","9":"tag-economy","10":"tag-uk","11":"tag-united-kingdom","12":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/243917","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=243917"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/243917\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/243918"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=243917"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=243917"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=243917"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}