Bulletin: Budget warning, obesity and mental health

Budget warning

With the Chancellor due to deliver the budget next week, the Institute for Fiscal Studies has warned that he should “resist the temptation to cut back provisional spending plans for the next parliament to create space for tax cuts.”

UK taxes are currently on track to reach record levels as a share of national income.

In next week’s bulletin, the IGD Economics team will review the budget and outline what this means for the future direction of the economy, for consumers and for food and grocery businesses.

IGD Viewpoint:

In our latest Viewpoint report, IGD predicted that the overall burden of taxation is likely to remain high for the foreseeable future. Taxes continue to rise due to the impact of the freezing of income tax thresholds during a period of wage inflation.

With taxes weighing heavily on many households, the temptation to lighten the tax burden for consumers, in what is expected to be an election year, must be strong. However, even taking an optimistic view, public finances are not in a good state.

There is unlikely to be room for tax cuts or benefit increases that will make a significant difference to household budgets.

Furthermore, voters are only part of the Chancellor’s audience. He also needs to consider what investors make of his plans. The Chancellor does not decide how much the country borrows or on what terms – lenders do.

Diet and obesity

Experts have recommended that the government should introduce a system of mandatory health targets for large food retailers. The latest report from Nesta argues that despite efforts, obesity has doubled since the 1990s and that a suite of ambitious policies should be implemented to deliver impact.

Healthy diets continue to rise up the agenda. In recent weeks, the House of Lords Food, Diet and Obesity Committee has been hearing enquiries and accepting evidence. Businesses can read the call for evidence here. Written evidence can be submitted to the committee by Monday 8 April 2024.

IGD’s Health team, alongside major retailers, is supporting a project evaluating the impact of the location-based restrictions on HFSS products implemented in October 2022. The results are expected at the end of 2024.

Mental health and work

New research from the Resolution Foundation has shown that mental health is having a meaningful impact on young people’s participation in the workforce. Over a third of 18 to 24-year-olds reported symptoms that indicated they were experiencing mental health problems.

Young people with mental health problems were more likely to be out of work compared to those without mental health issues (21% vs 13%).

IGD Viewpoint:

According to the ONS, the number of economically inactive people has risen from 19.2m in December 2019 (immediately pre-Covid) to 20.4m in November 2023.

At least some of these are potential workers, so rising inactivity erodes economic capacity and performance. The key driver of inactivity growth since the pandemic has been growth in long-term sickness – especially amongst older adults.

However, rapid growth of mental health issues among younger adults is a key concern, especially socially. In economic terms, failure to access the labour market when young may lead to career “scarring”, affecting earning power over a lifetime.

Encouragingly, however, it seems that most of those young people reporting mental ill-health are in work.