Unemployment is assumed flat at its October level and interest rates are projected in line with market expectations. His report to the House of Commons was published on 25November. No account is taken of tax proposals in this Pre-Budget Report. This wholly reflects the effects of real fiscal drag on income tax and the real increases in fuel and tobacco duty. All other taxes are projected to yield a fairly constant proportion of GDP in the medium term.
VAT receipts are especially hard to predict.
However, the VAT ratio has stabilised over the last couple of years, and it is thus extremely uncertain whether the ratio will remain flat in future, continue to fall, or even possibly start to recover. The shortfall in 1997-98 mostly reflects lower receipts of income tax and excise duties. 2 Includes Council Tax and money paid into the National Lottery Distribution Fund, as well as other central government taxes. There is also an underlying upward trend, reflecting real fiscal drag. The projected increase of nearly 1 percentage point in the tax burden this year is mostly accounted for by the July Budget measures including windfall tax.