UK Budget 2026: Significant tax increases and the unique economic challenges

CGTN Europe

CGTN Europe spoke to Nina Skero, Chief Executive of the Centre for Economics and Business Research.

Transcript

00:00Here's Nina Skirra, the Chief Executive for the Center for Economics and Business Research.

00:04Great to have you here in the studio.

00:06Now, it was never going to be easy, but aside from all the chaos that we've had in the run-up,

00:12what's your take on the budget that's been announced?

00:15Well, as you say, chaos aside, leaks aside, the very bizarre OBR slip-up aside,

00:21it is the budget that most of us were expecting,

00:24which is essentially a round two of what we saw a year ago from the Chancellor,

00:29which is a very big tax budget, a very big state budget,

00:34so it's very much a continuation of that trend.

00:36But is the electorate ready to accept this, or do you think we might have a bit of a public backlash?

00:42I mean, after all, you know, pensions, a bit of a hot-button issue everywhere right now.

00:47Well, it is year two of this government,

00:51which is commonly a time when a lot of governments seek to do things which they think are going to be unpopular

00:56with the idea that there is plenty of years before the election.

01:00Now, the pensions one that you mentioned, which really sticks out to me,

01:04and as soon as that leak started coming out, I was just thinking,

01:08this is going really in contrast to what the government is trying to accomplish.

01:12It's basically taking this ticking time bomb of underinvestment in pensions and pouring fuel on it.

01:19But it does stick out to me that they've now said that's going to come online in 2029.

01:24I do wonder if the government is thinking that'll give them a lot of time for a possible U-turn

01:30if things are looking a little bit better by then than they are at the moment.

01:33Now, you know, across Europe, across the rich world,

01:36governments are facing brutal pressures from higher interest rates,

01:39from climate change, from ageing populations.

01:42Britain's fiscal dilemmas aren't unique, are they?

01:46But do you think maybe they need unique solutions?

01:50You're absolutely right.

01:51The challenges are not unique, but it does seem that in a few distinct ways,

01:56the U.K. is slightly in a worse place than a lot of its counterparts.

01:59So here we still have a very inflationary dynamic.

02:03Our European counterparts are further ahead in terms of battling their inflationary problems.

02:09Growth in the U.K. is low,

02:11and there really wasn't a lot in the budget today to change that dynamic.

02:16You know, somewhere like the United States is seeing much higher growth rates.

02:19So sort of a unique, I would say still pretty unique to the downside circumstances,

02:24even among those common challenges.

02:26Considering the bleak economic backdrop,

02:30would you say that instability in the U.K. and elsewhere is the new normal?

02:36It's definitely been a very uncertain year, a very uncertain few months,

02:40but kind of an uncertain decade as well.

02:42I do think one maybe positive takeaway from today's budget is that the chancellor does seem to acknowledge that,

02:48and what she seems to have sort of her answer to that has been to really boost that fiscal buffer

02:54and to rates that are now a lot more similar to the long-term average.

02:59We've constantly been hearing this frame that that fiscal buffer is near an all-time low,

03:03or at an all-time low, waiver-thin is a phrase we've heard a lot.

03:07It's now much more substantial, and I think that's her way of saying I don't want to be a sort of a prisoner

03:12to markets, to my own fiscal rules down the line.

03:17I want to create a big enough buffer that I can cater for that instability.

03:20What do you think this budget says to investors?

03:23Is the U.K. still a good place to do business?

03:26It doesn't say anything encouraging to investors.

03:29So we've seen an increase on dividend tax, on savings.

03:34We've already had the big spike in how much employers are paying from the last budget.

03:42So there hasn't really been anything encouraging.

03:45We still have the very heavy burden from a year ago.

03:49So in that sense, I can't really imagine the kind of investor that would look at today's budget

03:54and think there is something in here that's now going to make my outlook on the U.K.

03:59more favorable as a place to bring business, to grow business.

04:02Oh, dear, Nina.

04:03I was hoping we could end on a positive note, but it's all a bit bleak, isn't it?

04:06Nina Siguero from the CEBR.

04:09Thank you very much.

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