1 Costings reflect the OBR’s latest economic and fiscal determinants from Spring Statement 2022 unless otherwise stated. 2 Gross cost reflects total direct tax no longer raised from the Health and Social Care Levy. 3 Using the OBR’s Autumn 2021 EFO assumption of the impact of the tax increase on wages and profits, scaled for 2022-23 to match the period the measure would have been in place. 4 Net cost reflects total cost after accounting for the reduction in cost due to the increases to wages as a result of the policy and the positive impact of this on tax receipts. 5 The rate was previously due to be cut to 19p in April 2024. This costing shows the additional cost above that decision which was made at Spring Statement 2022. 6 Measure applies to additional rate on all forms of income, including dividend income. The cost of reversing the 1.25pp dividend rate rise is not included in this costing and is covered in row 4. 7 Changes to thresholds reflect: increase to nil rate band from £125k to £250k, increase to First Time Buyers Relief (FTBR) nil-rate threshold from £300k to £425k and increase to FTBR property eligibility for purchases up to £625k from £500k. 8 Net cost reflects the impact of the cancellation of the increased rate of Diverted Profits Tax. 9 Costing is based on market prices taken from the ten working days between 29 August - 12 September. Due to price volatility, there is uncertainty in the numbers, particularly for later years. 10 Includes the impact on the Exchequer of the higher wages and profits that result from the cancellation of the NICs increase and Health and Social Care Levy (row 2). Totals may not sum due to rounding. 4.5 The costings do not take account of the aggregate indirect impact of the policy package on the wider economy and the fiscal consequences of this. In practice we would expect the energy support package to significantly reduce inflation for the period it is place, and the combined impact of the energy support package and the Growth Plan to support growth in the short term. We expect there to be other impacts, in the medium term. For instance, cancelling the planned introduction of the Health and Social Care Levy is expected to have a positive impact on wages, and reversing the planned increase in the Corporation Tax rate is expected to increase investment. In turn these would be expected to have a positive impact on the size of the economy in the medium-term. These economic impacts will therefore have significant positive fiscal impacts that are not captured in the costings set out in this document. A full assessment of the impact of the package on the economy, and the subsequent impact on the fiscal position, will be incorporated alongside the implications of recent economic developments in the next OBR forecast. 4.6 The Growth Plan aims to raise GDP growth over the medium-term, doing so would raise living standards and increase the size of the tax base. Table 4.3 sets out a range of illustrative effects of raising GDP growth in the medium-term on tax receipts. Holding the tax (Public Sector Current Receipts (PSCR)) to GDP ratio constant at its 2021-22 level, sustainably raising annual GDP growth by ½ to 1 percentage point each year could raise annual tax receipts by £23 billion to £47 billion by the fifth year. The economic effects of the Growth Plan, and the consequences for tax receipts, spending, government borrowing and debt, will be assessed in full by the OBR when they publish a forecast before the end of 2022. Previous OBR analysis suggests that raising real GDP growth to 2-3% a year over three years, from a base growth forecast of 1.6% per year for those three years, could provide a benefit to the public finances of £10-40 billion through a 2 range of effects across tax and spending. 1 Table 4.3: Illustrative effects on tax receipts of higher GDP growth Annual extra GDP growth each Change in cumulative GDP Annual tax receipts benefit from year for 5 years growth after 5 years GDP increase by the 5th year (£ billion) 0.00% 0.0% 0 0.25% 1.3% 11 0.50% 2.5% 23 0.75% 3.8% 35 1.00% 5.1% 47 1 The figures in Table 4.3 are purely illustrative; they do not provide an assessment of what effect the policy package will have. Table 4.3 assumes the PSCR to nominal GDP ratio is held at its 2021-22 outturn level of 38.5% and only shows the potential effects of a larger economy on tax receipts, assuming the structure of the economy and tax system do not change. The additional annual GDP growth is assumed to be an increase in trend growth. Increases in trend growth may only occur over the medium term. The OBR’s March forecast projected annual GDP growth of 1.9% on average over the next five fiscal years. Changes in the outlook for GDP growth will depend on other forces affecting the economy as well as changes to government policy. The illustrative receipts effect is rounded to the nearest £ billion. There would be a range of other effects in the public finances from faster economic growth, some of which might reduce government spending, while others could push spending higher. 2 Office for Budget Responsibility analysis, January 2022. The Growth Plan 2022 27