Chancellor Rishi Sunak should slash taxes at the budget to prevent the UK’s economic recovery from the Covid-19 crisis running out of steam.
That’s according to the chief of the top lobby group for taxpayers, who warned looming tax hikes will hit hardworking families and businesses and cause the recovery to “fall flat”.
John O’Connell, chief executive of the TaxPayers’ Alliance, said: “The upcoming budget is the perfect time for the chancellor to boost the economy by committing to tax cuts, eliminating red tape and supporting taxpayers and businesses.”
The calls come as fresh data shows the Great British consumer propelled the UK economy to near pre-pandemic in the second quarter of this year.
The UK economy grew by a faster than first thought rate between April and June, sparked by Brits heading out and spending savings accumulated during the worst of the Covid-19 crisis.
The Office for National Statistics (ONS) revised up their previous estimate for GDP growth to 5.5 per cent from 4.8 per cent this morning.
A resurgence in household spending drove the upward GDP revision, contributing four percentage points of the increase as restrictions on economic activity throughout the period were lifted.
The economy is still 3.3 per cent smaller than it was before the pandemic struck, but this is a significant uplift from the ONS’s previous 4.4 per cent estimate.
The household savings ratio fell sharply from 18.4 per cent in the first three months of 2021, all of which was spent under strict pandemic curbs, to 11.7 per cent in the second quarter.
Retailers, pubs, bars and restaurants registered the biggest contribution to output, as Brits took advantage of their newfound freedoms and headed to high streets.
Jonathan Athow, deputy national statistician for economic statistics at the ONS,said: “Household saving fell particularly strongly in the latest quarter from the record highs seen during the pandemic, as many people were again able to spend on shopping, eating out and driving their cars.”
The ONS also said the economy shrank by a better-than-first-feared 1.4 per cent at the beginning of the year. It previously said it had contracted 1.6 per cent.
However, experts warned the looming cost of living crisis triggered by tax hikes, soaring energy and fuel costs and supply chain breakdowns fuelling inflation poses risks to the future health of the economy.
Martin Beck, chief economic advisor to the EY ITEM Club, said: “Turning from history to the near-future, headwinds to growth from supply disruption, the negative effects on household spending power, sentiment from rising inflation and energy prices mean the recovery is looking more fragile.”
Government borrowing fell sharply, driven by the Covid-19 unlocking stimulating economic activity and yielding tax receipts.
The UK trade balance shifted from surplus in the first in quarter to a £900m deficit in the second quarter.