As Andy Burnham prepares to assume the role of Prime Minister, the Organisation for Economic Co-operation and Development (OECD) has issued a strong recommendation to reverse recent tax hikes and reconsider spending policies.
The Paris-based think tank argued that tax increases implemented over the past two years have damaged the United Kingdom's competitiveness, contributed to the rising cost of living, and hindered job creation and economic growth. The OECD specifically criticized measures such as extending the freeze on income tax thresholds, increasing employer’s National Insurance contributions, and the impact of the Employment Rights Act.
The OECD also highlighted a "youth jobs crisis," with a million young people out of work, education, or training, warning it poses a risk to the future of the state pension. The organization suggests that Burnham should prioritize cutting welfare spending over further tax increases and should reverse the National Insurance rise and the freeze on tax thresholds.
Concerns about the UK's economic health are echoed by the National Institute of Economic and Social Research, which anticipates a "stagflationary" economy characterized by waning growth and rising inflation for the remainder of the year.
Further contributing to the economic unease, Britain's public markets are reportedly at risk due to low valuations and a lack of investor demand, leading to foreign companies acquiring UK-listed firms at discounted prices. The Association of Investment Companies (AIC) has called for bold government intervention to revitalize the stock market, proposing the abolition of stamp duty, a reversal of tax relief cuts for venture capital trusts, and improved incentives for retail investors.
The OECD indicated that any new tax increases, particularly on capital gains and property, would be highly detrimental, especially given the UK's already high property taxes.