UK financial regulators admit: Reeves’ "employment tax" impact exceeds expectations; last year’s growth forecasts were overly optimistic

⑴ The Office for Budget Responsibility has acknowledged that Chancellor Reeves' decision to raise National Insurance contributions in the 2024 budget will have a greater impact on the economy than initially expected. The regulator stated that last year’s UK growth forecast was “overly optimistic,” with the initial 2% projection now revised down to 1.4%. ⑵ In its new report, the OBR pointed out that it may have underestimated the “policy effect” on the economy—a move that has been widely criticised for forcing businesses, especially in the hospitality sector, to close and exacerbating the youth unemployment crisis. The Director of Policy at the British Chambers of Commerce testified to Parliament that, after the National Insurance changes took effect, 13% of businesses laid off staff directly as a result. ⑶ The OBR also stated that when it updates its forecast later this year due to the Iran situation, it will take into account the factors behind inflation’s unexpectedly strong persistence following the 2022 energy price shock. The previous data set released in March showed that Reeves had a £24 billion fiscal buffer to achieve a balanced budget by 2029-30, but this figure did not include the impact of the Iran situation that began on 28 February. ⑷ The Chairman of the British Hospitality Association pointed out that policy changes over the past two years have sharply increased the cost of part-time positions, resulting in fewer job opportunities for young people, while the tax rate for the 16-24 age group in the hospitality sector has risen by 75%.