UK Chancellor Avoids Tax Hike Despite Grim Economic Projections: Independent Economist

London: Chancellor of the Exchequer Jeremy Hunt would have been forced to raise UK taxes by up to £20 billion if the Office for Budget Responsibility had used the Bank of England’s recent gloomy economic forecast, according to leading economist Ian Mulheirn. Mulheirn noted that the BoE and OBR, the country’s two main forecasting bodies, had vastly different assessments of the economy’s potential growth rate, suggesting that each institution may have biases that align with their respective objectives. While the OBR projected an average growth rate of 1.6% over five years, the BoE estimated a rate of just 0.75% next year, rising to 1.25% in the medium term. The discrepant forecasts influenced Hunt’s recent decision to announce £21 billion in tax cuts. However, experts warn that the BoE’s gloomier outlook could wipe out the fiscal headroom against Hunt’s rules and require additional tax increases or austerity measures to meet his targets.