Historic records set by the 2021 Budget

Ian Jones, PA

If the latest forecasts from the Office for Budget Responsibility (OBR) are correct, the UK is on course for its highest peacetime deficit in modern history, along with the biggest drop in economic output for nearly 100 years.

Rishi Sunak also announced changes that will see parts of the economy return to how they looked at the time of two former Labour chancellors around half a century ago.

Here are some of the historic markers against which the 2021 Budget can be measured.

– Highest deficit (as % of GDP) since 1944/45

Government borrowing is on course to hit its highest level since the end of the Second World War.

The OBR forecasts the deficit for 2020/21 will reach the equivalent of 16.9% of GDP (gross domestic product, or the total value of the economy). This would be the highest level since 1944/45, when the figure stood at 22.4%.

It would easily beat the level of borrowing seen during the financial crash, when the deficit reached 10.1% of GDP in 2009/10.

(PA Graphics)

– Highest debt (as % of GDP) since 1958/59

Public-sector net debt in the UK in 2020/21 is forecast by the OBR to reach the equivalent of 100.2% of GDP. It is then forecast to climb even further, hitting 109.7% by 2023/24.

This would be the highest level since 1958/59, when debt at the end of the financial year stood at 114.3% of GDP, Harold Macmillan was prime minister and Russ Conway was at the top of the singles charts with the piano instrumental Side Saddle.

(PA Graphics)

– Highest tax burden (as % of GDP) since 1969/70

Mr Roy Jenkins goes to present budget
Roy Jenkins greets the press before delivering his Budget speech in April 1970 (PA)

The tax rises announced by Rishi Sunak push up the tax burden from the equivalent of 33.4% of GDP in 2019/20 to 35.0% by 2025/26: the highest level since 1969/70, when Roy Jenkins was chancellor in the Labour government of Harold Wilson.

More than half of this increase is as a result of the planned rise in 2023 in the main rate of corporation tax rate from 19% to 25%.

(PA Graphics)

– First rise in corporation tax since 1974

Denis Healey & budget box 1975
Denis Healey with the traditional red briefcase, in which successive chancellors have carried their Budget speech from Downing Street to the House of Commons (PA)

Rishi Sunak managed in this Budget to invite comparisons with not one but two of his Labour predecessors as chancellor.

The rise in corporation tax is the first time this particular tax has been increased since Denis Healey raised it from 40% to 52% in March 1974. Since 1974 the tax has only ever been held at the same level or reduced – until now.

(PA Graphics)

– Highest spending (as % of GDP) since 1945/46

The total amount the Government is forecast to spend in 2020/21, otherwise known as Total Managed Expenditure (TME), is £1.14 trillion.

It is the equivalent of 54.4% of GDP – the highest level of TME since 1945/46, when it stood at 55.2%.

It would also be a big jump from 39.8% of GDP in 2019/20.

(PA Graphics)

– Worst economic growth for a century

When the OBR published its economic forecasts in November 2020, GDP for the year 2020 was estimated to fall by 11.3%.

This would have ranked as the largest drop in annual economic output since the so-called Great Frost of 1709, when the UK – along with the rest of Europe – was plunged into one of the coldest winters in modern history.

(PA Graphics)

The OBR has since revised its forecasts, with GDP in 2020 now estimated to fall by 9.9%.

This is likely to be the biggest drop since 1921, when the economy shrank by around 10%, according to Bank of England figures.

Comparable annual data for GDP published by the Office for National Statistics begins in 1949, and by this measure a drop of 9.9% would be the biggest on record.