London – Alongside Chancellor of the Exchequer John Healey’s Budget, the UK Office for Budget Responsibility (OBR) has published new forecasts for the impact of AI on the UK’s economic and fiscal outlook. New analysis by the CCIA Research Center explores the implications of those forecasted AI-related productivity gains for the UK public finances under central, upside and transformative scenarios provided by the OBR. It finds:
- The OBR’s central case (AI reaching 0.2 points a year): AI raises three times the digital services tax, and funds a third of the Chancellor’s £14.5 billion headroom, enough to nearly cover the Single Intelligence Account (MI5, MI6, GCHQ).
- The OBR’s optimistic case (around 0.5 points): AI raises almost as much as Capital Gains Tax and lifts headroom to about £50 billion, an improvement in fiscal headroom roughly equivalent to the extra annual cost of the Government’s pledge to take defence to 3.5 per cent of GDP.
- The OBR’s transformative case (0.8 points a year, averaged over 2026-30): AI raises more than total Business Rates; an improvement in fiscal headroom comparable to the budgets of the Transport department and Home Office combined, with headroom near £66.5 billion.
The following can be attributed to CCIA Senior Director and head of CCIA’s London office Matthew Sinclair:
“Seizing the UK’s AI opportunity can ease the difficult tradeoffs facing Ministers as they seek to manage the public finances, raise living standards and deliver improvements in public services. The latest OBR forecast makes the stakes clearer than ever. The Government should embrace regulatory reform to ease barriers to embedding AI in popular digital services, and deliver the plans announced in the Budget to support new data centre capacity with urgency.”
