MNI UK Budget Review: Hike Taxes, Energy Prices into Election?

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• We look at the ten big picture takeaways from the Budget, now that the dust has settled.
• Headroom was higher than expected at GBP21.7bln (market expectations had been for GBP15bln) but we question its credibility. There is GBP8.6bln from reversing energy bill cuts, efficiency savings and HMRC closing the “tax gap” built into this number alone (with the latter two the increases to these measures since the Spring Statement). Without these headroom would be GBP13.1bln. In addition, OBR forecasts still look optimistic to us.
• The majority of the energy bill cuts will be reversed in April 2029. Whether this is believed or not, it will be incorporated into BOE forecasts, seeing a spike higher in 3-year CPI forecast in the April MPR, making communicating cuts challenging. We look at the wider implications for BOE policy.
• Almost all of the tax increases are backloaded, so there is a small fiscal stimulus in the near-term.
• We look at the implications for the remit from the maturity split, the cancelling of all long-dated auctions and the UKTB consultation.
• We also look into the political risk implications.