Like Bette Davis' character, Rishi Sunak will probably be bracing the UK population for a bumpy path ahead, perhaps for a number of years. The Office for Budget Responsibility, which independently produces the government's forecasts, is on course to follow the Bank of England in predicting a close to 11% contraction in 2020, the worst annual performance for more than 300 years.
Fundamental questions will arise including: how do we plug the gap, will there be tax hikes, what form might they take and when should they be implemented?
As a great fan of "trickle-down" economics, usually I would hope that the government doesn't in the near future (whilst the economy is in shock) heavily tax businesses and the wealthy, as I think we need long term investment and to encourage spending, and defer tax rises until the economy is booming again.
However, it has been noted that many wealthy professionals, safely ensconced in their spare rooms, are greatly enjoying the zoom economy. Some have seen their savings flourish as they no longer pay for the commute, the morning coffee, the lunchtime sushi, and the drinks, dinner and theatre after work, as well as the taxi home, thus saving potentially thousands a month. Deutsche Bank Research (DBR) has suggested introducing a 5% tax on salaries, paid either by employers who encourage their employees to work from home or workers who choose to do so. DBR said that such a tax could raise almost £7bn a year in Britain.
Whether this or other tax measures are trailed next week in the spending review remains to be seen, but the Chancellor's announcement is likely to be a sobering experience as he tries to smooth out the bumps ahead.
The chancellor is preparing to publish a "scary" outlook for the UK economy in next week's spending review. The FT says the report will contain the largest downgrade in UK economic performance and public finances since the second world war.
