Sunday, March 26, 2023
A higher tax burden is upon us, and it's mainly by stealth
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

A new tax year is almost upon us, and accountants and financial advisers are burning the midnight oil to ensure that they have done everything they need to before the curtain comes down on 2022-23. For everybody else, this April people and businesses have every reason to look forward to the new tax year with trepidation.

We know, thanks to Jeremy Hunt’s budget earlier this month, that the main rate of corporation tax is going up from 19 to 25 per cent, reversing nearly four decades of cuts, and taking us back to roughly where the rate was at the start of the current period of Tory government, in 2010.

A policy of cutting corporation tax rates, pursued by Tory and Labour governments, has thus gone into reverse. For business it will mean that corporation tax receipts will rise to 3.7 per cent of gross domestic product (GDP), compared with between 2 and 2.5 per cent in recent years. It will be the most since the tax was first introduced in 1965. The chancellor’s more generous but temporary capital allowances do not stop this happening.

Some even more extraordinary things are happening to personal taxation as a result of the prolonged freeze in income tax allowances and thresholds. Calculations by the Office for Responsibility (OBR) show that the freeze, which was extended by Jeremy Hunt for two years in his autumn statement and will now last until 2027-28, represents a massive stealth tax. If it is not the biggest ever such tax, certainly as it affects individuals, it is hard to think of any bigger.

Combined with the reduction in the additional rate threshold – the rate at which the very top rate is paid – from £150,000 to £125,140, a direct consequence of autumn’s mini budget disaster, income tax is going up a lot. By the end of the freeze, receipts will be an additional £29 billion a year, equivalent to an extra 4p on the basic rate of income tax.

The policy will result 3.2 million new taxpayers, a rise of nearly a tenth, 2.1 million more higher rate taxpayers and 350,000 more paying the additional 45 per cent rate. By any measure, this is a big increase in income tax.

Tax is tax, whether it is upfront, as with the corporation tax hike, or stealthy, as with the long freeze in income tax allowances and thresholds, and a related freeze for national insurance.

Sunday, March 19, 2023
Not yet a plan for growth, nor one for investment
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

Two weeks ago, I wrote here about the need for a plan for growth, to lift the economy out of its torpor. The question this weekend, as well as the questions swirling around the banking system, is whether we now have one. It is perhaps a reflection of how low our expectations have become that an official forecast showing that the economy will shrink by only 0.2 per cent this year has become a cause for celebration on the part of the chancellor.

This is because the economy is no longer heading for a “technical” recession, two successive quarters of falling gross domestic product (GDP), according to the Office for Budget Responsibility (OBR). I have written before about the daftness of this definition, invented for political reasons in America in the 1960s and not generally used there. As it is, the OBR expects GDP to fall this quarter and remain flat in April-June, despite the extra bank holiday for the King’s coronation, so it could be a close-run thing.

Let us face it though. Every time in the post-war period that there has been an annual fall in GDP, which the OBR is just about predicting, it has met the sensible definition of recession. But the best way of describing the economy this year is one I have been using for quite a while, which is that it will be broadly flat, as it has been over the past year or so, as long as those banking vulnerabilities do not evolve into something more serious.

But back to that question of whether Jeremy Hunt provided us with a plan for growth in his budge, which was his first. Though it seems he has been at the Treasury for a long time, is it is only just over five months since Liz Truss (remember her?) turned to him to calm things down.

In my piece a fortnight ago, I quoted Michael Saunders, formerly a member of the Bank of England’s monetary policy committee (MPC), now a senior adviser at Oxford Economics. His verdict was that Hunt had given us “the faint outline of a plan to improve the economy’s supply-side and lift the economy’s dismal medium term growth trend, with the measures on childcare, labour supply, investment allowances and pensions”.

A faint outline, a useful first step, is a good way to describe it. Paul Johnson, director of the Institute for Fiscal Studies, said the chancellor had “laid out some elements of a sensible strategy to support growth”, though adding that: “There is plenty to quibble with, but if you want to focus on growth there is at least some of what you might want here, attempting to deal with incentives to work and to invest.”

The budget measures to bring more people into the workforce deserve praise. They are the kind of policy that should be part of a plan for growth, particularly the chancellor’s emphasis on free childcare, a further expansion of the welfare state. Not only were they part of the plan for growth outlined here recently but they should not become a political football. They will not be fully implemented until September 2025, after the next general election, but should not be bone of contention between the political parties.

They may not be transformational but they will make a difference, particularly for mothers who want to return to work sooner. There was less than meets the eye for over-50s who have left the workforce, however, the vast majority of whom have not done so because they risked falling foul of the now-abolished pension lifetime allowance. Lifting the allowance was fine, abolishing it looks like an unnecessary rush of blood to the head.

A proper plan for growth requires the UK to lift business investment, which seems stuck at about 10 per cent of GDP no matter what, compared with an average of 14 per cent for competitor countries. But the cliff-edge of next month’s rise in corporation tax from 19 to 25 per cent, combined with the end of the 130 per cent “super deduction” of qualifying investment against corporation tax, threatened to push it down.

For the past year some of us have been puzzling about what the chancellor would do to offset this. When, just over a year ago, Rishi Sunak promised measures to support investment in the face of the rise in corporation tax from 19 to 25 per cent, he ruled out full expensing as too expensive. But full expensing, a 100 per cent allowance against corporation tax is what was announced for three years in the budget.

It is a reminder of the mess that the four Tory chancellors of the past three years have made of the tax system. When Sunak was chancellor under Boris Johnson and under pressure to shelve the planned rise in national insurance in the wake of the cost-of-living crisis, he responded by increasing the threshold at which is starts to be paid. A higher tax rate but more generous reliefs.

Sunday, March 12, 2023
A cash-strapped chancellor only has room to tinker
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

It is the Sunday before the budget, and it is my constitutional duty to write something about it. When people ask me what to expect in it, I get a sense of what it must be like to be Jeremy Hunt. Nobody tells me “That’s interesting” or, still less, “that will be a game-changer”. The chancellor may surprise us, but the strong sense is that the government is still in repair mode when it comes to the public finances, and that he will want nothing to get in the way of this year’s expected sharp fall in inflation.

It is good rule of thumb that the more constrained a chancellor’s room for manoeuvre, the more intensive the demands on him to do big things. Some of this, for business lobby groups and think tanks, is on the principle of if you don’t ask you don’t get. When they don’t get when Hunt reveals all on Wednesday, and it falls short, they will have a built-in grievance.

Though on the face of it he does have some room for manoeuvre – the budget deficit this year coming in about £30 billion lower than the Office for Budget Responsibility (OBR) expected in the autumn – much of this is due to the temporary effect of the energy price guarantee, the freeze, costing less than expected because of lower international gas prices. There is a limited amount of follow-through to later years, particularly with the OBR set to take a more downbeat view of medium=-term growth prospects.

One of those big things that many businesses and think tanks would like him to do is not proceed with the increase in corporation tax from 19 to 25 per cent. But this is a considerable revenue-earner for a cash-strapped chancellor, and there is no suggestion that he is minded to forego that revenue.

The National Institute of Economic and Social Research (Niesr), interestingly, thinks he could do something about it, and limit the rise in corporation tax next month. But its forecasts, which are for much better public finances over the medium-term, may not be of much comfort and look different to the official ones likely to be presented this week. Indeed, its analysis has been greeted with bemusement in the Treasury. NIESR expects high inflation to last for longer, providing a boost to revenues through the so-called inflation tax, whereby higher inflation generates more revenue in cash terms.

There are worries, rightly, that the hike in corporation tax, coinciding as it does with the end of the co-called “super deduction”, under which 130 per cent of qualifying business investment can be offset against corporation tax, will create a cliff-edge for business investment, sending it tumbling again. As has been reported, some form of more generous investment allowances, though not as generous as the super deduction, are set to be announced to fill part of the gap.

Businesses have started to look enviously at what is happening in America, with Joe Biden’s Inflation Reduction Act IRA), which provides big subsidies to invest in US-based green technology and which is seen as a magnet to pull investment out of Britain and to America,

The Institute of Directors, the business organisation which once proudly carried the Thatcherite flame, wants a similar act for the UK and nearly 80 per cent of its members surveyed backed the idea.

“The Inflation Reduction Act in the US is a game changer which cannot be ignored by UK policy makers,” said Dr Roger Barker, the IoD’s head of policy. “It provides substantial incentives for companies to pursue green innovations and green technologies in the United States rather than in the United Kingdom. The EU is also raising the stakes through its ‘Green Deal Industrial Plan’ which, amongst other things, is proposing a significant relaxation of the EU’s state aid rules when it comes to investment in green technology.

“A particular concern is that short-term budgetary concerns will override the strategic imperative of establishing market leadership positions in green business. It’s imperative that government and the private sector work together, otherwise the UK will find itself left behind in the accelerating race to lead the green economy.”

If the government is to introduce its own IRA, it is keeping it very well hidden. Indeed, Kemi Badenoch, secretary of state in the new/old department of business and trade, described it last month as both protectionist and risking further problems for problems for global supply chains. Barring a Damascene conversion, this does not look to be on the table.

Hunt is set to use £6 billion of the limited resources at his disposal by maintaining the 5p a litre cut in fuel duty announced by Rishi Sunak when he was chancellor a year ago. He will also, as is customary, not raise the duty in line with inflation, government policy since 2011. That is no surprise but the clear political difficulty of reversing the cut helped explain why it was so modest a year ago, in contrast to many other countries. The Treasury knew that this was one cut that was never likely to be reversed.

Sunday, March 05, 2023
We need a plan for growth, and this one's a good start
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

Five point plans are very much in vogue right now. Rishi Sunak has one and so does Sir Keir Starmer. Notwithstanding this, and his achievement negotiating changes in the Northern Ireland protocol and stabilising financial markets, the prime minister is often accused of not having a plan for growth. His immediate predecessor had one, mainly consisting of the thought that if you talked about growth enough it would happen. Starmer has an ambition for growth, which is to make the UK the fastest growing economy in the G7 group of big Western industrial nations, though he has yet to colour in the detail.

I may be able to offer something that could be useful to both, courtesy of Michael Saunders, who until last year was a member of the Bank of England’s monetary policy committee (MPC). He is now senior adviser to Oxford Economics, the consultancy.

His plan for growth is a seven-pointer, not a mere five, and from somebody who has watched the policy debate from a ringside seat at the Bank, it is rather interesting. His starting point is that things appear to have gone from bad to worse in terms of the UK’s growth potential, now perhaps less than 1 per cent a year, hit by the financial crisis, then Brexit, followed by the pandemic and a cost-of-living crisis mainly caused by Russia’s invasion of Ukraine. Each one has inflicted damage, and the challenge is to stop it becoming permanent.

It means that the current parliament is likely to be the worst on record for growth and living standards, with little sign of the sunlit uplands beyond.

Any plan for growth must focus on the supply side of the economy and Saunders’s first point is that there is no such institutional focus in the UK. The Treasury is a growth department in mission statement only, focused as it is on the control of public spending. The Office for Budget Responsibility (OBR) is there to make sure it does it properly, while the Bank of England’s responsibilities are the control of inflation and financial stability.

Into this mix, he suggests adding a Supply-Side Council of external experts, perhaps using the model of the National Infrastructure Commission or America’s Council of Economic Advisers. Ideally it would survive changes of prime minister and government, in a way that supply-side policies, such as they have been, have not.

Also, as he writes: “A key advantage of having such an independent supply-side council is that it would make the link from policy measures to faster potential growth (and higher tax revenues) more credible, especially for financial markets.”

A second priority, which is less likely to give certain people an attack of the vapours than a few months ago, following Sunak’s Northern Ireland breakthrough, is better relations and closer trade links with the EU. Whatever you think of Brexit, and I have made my views pretty clear over the years, the headbanger hard Brexit we have served the economy, business, and British citizens very badly. It helps explain not only slower growth, but as Saunders points out, the weaker tax revenues that have necessitated tax hikes.

Rejoining the EU is a distant prospect, however much some would wish it, but improving on the UK’s thin and unsatisfactory trade and co-operation agreement with the EU is not, particularly now.

Sunday, February 26, 2023
Things are looking up, but the deficit isn't yet fixed
Posted by David Smith at 09:00 AM

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

The mood is lifting. In the space of a few weeks the outlook for this year has gone from gloom to cautious optimism. Measures of business activity like the purchasing managers’ surveys have jumped this month, and not just in the UK. From January’s surprise rise in retail sales onwards, hard data is coming out stronger than expected.

Consumer confidence in recent months has been at its weakest in the 50 years since GfK has been surveying it, a reflection of the fact that the pandemic quickly gave way to the cost-of-living crisis and the biggest fall in real incomes on record.

It, too, is also on the up. The latest GfK reading, for this month, showed a jump of seven points, on figures released on Friday. Confidence is still at historically low levels, with an index reading of -38, but as GfK’s Joe Staton points out, “consumers have suddenly shown more optimism about the state of their personal finances and the general economic situation, especially for the coming year”.

This is good news, and what looks like a collective sign of relief that we are coming to the end of what could have been a terrible winter. It is also an encouraging backdrop to Jeremy Hunt’s budget, his first – though he has already had a couple of bites at the cherry – due on March 15.

Here again, there has been good news. It is not unusual for official figures to show a budget surplus in January, when the self-assessment income tax receipts roll in. This year, however, the fear was that this would be swamped by the cost of supporting households and businesses through the energy crisis.

Strong tax receipts, however, and a smaller than expected cost of energy support led to a £5.4 billion budget surplus last month. Not only that, but in the first 10 months of the current fiscal year, cumulative borrowing of £116.9 billion is, after adjustments, about £30 billion lower than the Office for Budget Responsibility (OBR) expected as recently as last November. The OBR could not assume last autumn that the cost of energy support would be a lot lower than industry experts and energy markets were indicating at the time, though that has been the case. Tax receipts, particularly income tax, national insurance and capita gains tax, also outperformed expectations.

When the figures were published, you could almost see the pound signs flick up in the eyes of Tory MPs desperate for the chancellor to announce tax cuts in the budget, and among business groups which would love him to scrap April’s rise in corporation tax from 19 to 25 per cent. Simon Lowth, BT’s chief financial officer, described the coming increase as sending the UK in a “drastically anti-investment direction”.

Hunt has thus found himself in the far from unusual pre-budget position of furiously trying to dampen down expectations. You can understand this, If you are planning to pull a few rabbits out of the hat, you do not want them hopping around the fields for everybody to see first.

But, while we wait to hear what he has up his sleeve, the chancellor had a point. This year, as far as the budget is concerned, is the past, and what matters is the future. It may not feel like a tax cut but reports suggest that the chancellor, to avoid open revolt on his own backbenches, is planning one.

Sunday, February 19, 2023
Forecasters are floored by inflation yet again
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

The table accompanying this piece is on

One of the most famous quotes about forecasting, or prediction, is that it is difficult, especially when it is about the future. So famous is it, in fact, that it is attributed to at least three masters of the quotable quote, Yogi Berra, the American baseball legend, Niels Bohr, the Danish Nobel prizewinning physicist and, of course, Mark Twain. In fact, if you are ever taking part in a quiz, Mark Twain is a good answer to give to any question involving quotes. It doesn’t work for “to be or not to be”, but it works for most others.

I mention it because economic forecasters have found the past three years difficult, and last year was no exception. At the start of 2022, economists did pretty well in predicting that it would be a good year for calendar year UK economic growth. It was clear that comparisons with the previous year, and particularly the lockdown-affected first quarter of 2021, would guarantee that the level of gross domestic product last year would be significantly higher than in the previous year.

If there was a fault in the growth forecasts just over 12 months ago, it was that many of them were a bit too strong. But most were in the right ballpark, and not too far away from the 4 per cent figure reported by the official statisticians nine days ago. Had my annual forecasting exercise, which I have been running for at least 25 years, stopped at growth, it would have been a good year.

Unfortunately it did not but, before going into that, let me say something about the forecasting league table. The source for the 2022 forecasts is the Treasury’s monthly compilation of independent forecasts, in this case for the forecasts were made in December or January.

Some were not, and I have removed one or two which had stayed in the comparison even though their forecasts were made a long time before, in some case 6-9 months before. The exercise is a little unfair on the Office for Budget Responsibility (OBR), because its twice a year forecasts are tied to budgets or other fiscal events. Its 2022 forecasts in this case dated from the previous October.

This is also an issue for the big international forecasters like the International Monetary Fund (IMF) and Organisation for Economic Co-operation and Development (OECD), which also suffer from not predicting all the economic variables in my comparison.

The Treasury compilation covers more than 30 organisations. It is not comprehensive, but it is the best that we have. Forecasters choose whether to submit their predictions. The absence of the independent Bank of England from this compilation of independent forecasts is a longstanding curiosity.

Now for the nub of the forecasters’ problem. Just over a year ago, in reflecting on the record for 2021, the headline on the equivalent piece to this was “Why economic forecasters missed the surge in inflation”. Well, to quote not Mark Twain, but another quotable American, Britney Spears, ‘Oops, they did it again.’

Sunday, February 12, 2023
There's no room for tax cuts, but plenty for tax reform
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

It is Sunday, so the Tory party is probably obsessing about tax, as it is every other day of the week. On a distant horizon there is a Shangri-La of low taxes and energising tax cuts, last visited, all too briefly, under Margaret Thatcher in the 1980s. One of her successors, if that is not too strong a word, has popped up again in recent days, when it might have been wiser to keep quiet, Liz Truss again making the case for unfunded tax cuts, despite everything that happened last autumn.

Another, Boris Johnson, rarely misses an opportunity to slip in a call for tax cuts, and thus increase the pressure on Rishi Sunak, and Jeremy Hunt, the chancellor, as he prepares for his March 15 budget.

One of the most damaging bits of economic analysis when it gets into the wrong hands is, as I have pointed out here before, the Laffer curve. The idea that there is a point when tax rates are so high that increasing them reduces rather than increases revenue is uncontroversial. But it has become so madly distorted as to be dangerous.

It has been a crazy 12 months since Sunak, as chancellor, delivered his Mais lecture at the Bayes Business School in the City of London a year ago. But his words then, in an address which talked up the desirability of affordable tax cuts, deserve repeating.

As he put it then: “I am disheartened when I hear the flippant claim that ‘tax cuts always pay for themselves’. They do not. Cutting tax sustainably requires hard work, prioritisation, and the willingness to make difficult and often unpopular arguments elsewhere.”

He was right. It is also right, as those responsible for establishing the Office for Budget Responsibility (OBR) have pointed out, to be aware that it, the government’s fiscal watchdog, takes into account dynamic effects when assessing tax increases or cuts, as does the Treasury. Those dynamic effects often mean that tax cuts cost a lot less than a crude analysis would suggest, Rarely if ever are they costless, however.

For me, the big surprise is that a crude debate about tax cuts has not become a debate about tax reform. The concern at the moment is that the aggregate tax burden, as measured and predicted by the OBR, will rise to 37.4 per cent of gross domestic product in the fiscal year starting in April, 2023-24, and further to 37.5 per cent the following year. These are the highest readings on record, the previous high being 37.2 per cent in 1948 (when records began), as the economy was being brought down from wartime levels of tax and spending.

The tax burden was lower in the past, but how much did it fall during that Shangri-La period in the 1980s? The answer is that it did not. It was 30.7 per cent of GDP in Thatcher’s last full year in office, 1989-90, compared with 30.4 per cent in 1978-79, the last year of the Labour government of the 1970s. The tax burden in the 1990s, under John Major and then Tony Blair, averages 30.3 per cent of GDP, compared with 32.1 per cent in the 1980s.

What did happen, of course, during the 1980s, as well as boost from North Sea oil revenues, was tax reform. It was during this period that two big shifts occurred. The first was the shift from direct to indirect taxation. The initial “tax-cutting” budget of the Thatcher era, in which the basic rate of income tax was reduced from 33 to 3o per cent and the top rate from 83 to 60 per cent, was in fact a tax-shifting budget, those cuts made possible by an increase in VAT to 15 per cent, from 8 per cent on most goods and 12.5 per cent on luxuries.

The second big shift was the Lawson doctrine of reducing tax rates by scrapping or restricting tax reliefs, most notably for corporation tax, but followed later with other taxes.

Sunday, February 05, 2023
Don't shoot the messenger bringing gloomy forecasts
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt. Not to be reproduced without permission.

Economic forecasts have been in the news. Not since it organised a humiliating bailout of the UK economy in 1976 has the International Monetary Fund (IMF) attracted more headlines than it did a few days ago, or more criticism. At the heart of the criticism was a new forecast which, for the UK at least, was unremarkable.

The IMF’s prediction of a 0.6 per cent drop in gross domestic product (GDP) this year was less gloomy than the average new forecast by independent forecasters compiled by the Treasury, compiled by the Treasury, which is for a fall of 0.9 per cent. But it still produced a storm of “what do they know?” outrage, particularly as it coincided with the third anniversary of Brexit. I shall return to that.

On Thursday, after the IMF, the Bank of England announced a rise in official interest rates to 4 per cent, and hinted that this could be close to the peak. I am feeling a lot more comfortable with my prediction, first made during the Truss-Kwarteng blowout last autumn of a 4 per cent peak.

Less noticed was the Bank’s new forecast, for a milder recession that it predicted in November, because of a lower market path for interest rates and weaker energy prices. It nevertheless is for a recession, with GDP falling by 0.5 per cent this year and 0.25 per cent in 2024. That is a touch gloomier than the IMF, which predicts a 0.9 per cent rise in next year. Both are consistent with an economy that will feel flat, rather than falling sharply.

When forecasts are in the headlines, we have to get used to the “they’re always wrong” chorus from people who have no understanding of them. Forecasts are conditioned on assumptions, and getting those assumptions right has been extremely difficult at the start of the past three years.

At the beginning of 2020, nobody could have predicted the severity and economic consequences of the pandemic. A year later, when the vaccine rollout had barely started, it was hard to predict how effective it would be. This time last year, while the drums of war had started to sound, nobody could have accurately predicted the consequences of a Russian invasion of Ukraine. My annual forecasting league table in a couple of weeks will demonstrate the impact of that, particularly on inflation forecasts.

The IMF was actually a bit optimistic on the UK this time last year, predicting 4.7 per cent growth. The Bank was close to the likely 4.1 per cent outturn, predicting 3.75 per cent.

As it happens, the official forecaster, the Office for Budget Responsibility (OBR), has just published its annual forecast evaluation report. It concedes that it underestimated the extent of the rise in inflation, and also the strength of the economy’s recovery in 2021-22. But, as a result of official downward revisions to the level of GDP, its most recent forecast, last November, implies a weaker path than it earlier predicted. The economy is smaller than it was. In general, however, the OBR has tended to overpredict growth rather than underpredict it, it concedes, mainly because it has always anticipated the return of normal productivity growth, which has yet to materialise.

The Bank is also subject to something of an optimism bias when it comes to inflation. Professor Costas Milas of Liverpool University estimates that its two-year forecasts have underestimated inflation by an average (mean) of 0.66 percentage points, or a median of 0.37 points. It may be the wisdom of crowds but on his estimates, public inflation expectations (which tend to overestimate inflation) get closer what happens than the forecasts.

The message is clear. We should not automatically assume that forecasts are biased towards the gloomy. Often, the opposite is true.

The Treasury, under Jeremy Hunt, is as addicted to cherry picking the data as under any of his predecessors. Once it was aware of the IMF’s forecast, and the headlines it would generate, it put out a series of carefully-selected statistics, under the general heading of: “Alexa, five me some figures which show the UK in a good light.” I pity the poor officials tasked with this. This may be the chancellor’s way of addressing the “declinism” he thinks we are prone to. I can tell him that it needs a bit more than that.

The reason that forecasts for the UK economy are downbeat is that the economy has been stagnating for a year and that it does not take much it to continue stagnating, at best, or slip into a mild recession at worse.

Stagnating? Did not the economy grow by more than 4 per cent last year? Yes, in the sense that GDP last year was that amount higher, in real terms, than in 2021. But that apparently higher growth is a statistical quirk, largely due to the fact that GDP in the first quarter of last year was 10.7 per cent higher than its lockdown-affected equivalent quarter in 2021.

A better guide to the economy’s growth as experienced by households and businesses is growth “through” the year, in other words what happened between the beginning and the end. We have monthly gross domestic product figures up to November – December data will be published this week – and they show that GDP in November was exactly the same as in January. There was, in other words, no growth through the year.

This year, this stagnant economy faces higher taxes – corporation tax will go up sharply in April, as will income tax and national insurance as a result of the freezing of allowances and thresholds – as well as digesting the many interest rates rises announced by the Bank over the past 12 months. It is not surprising that the outlook is downbeat.