Brexit will put the public finances under significant short-term strain. Two longer-term trends will further reshape the state and health of the public finances in the 2020s.

Falling expenditure as a share of GDP will reduce the size of the state while the composition of expenditure will shift towards older people and health spending. At the same time, the deficit will strike back. Due to demographic change, a structural tax gap will emerge by the mid-2020s on current trends. Fiscal fragility, whether due to weak economic growth, falling rates of migration, or stagnant wages, are all further risks. Given this, a strategic review of taxation – both of revenue and expenditure – will be critical if the public finances are to sustainably meet the challenges of the future.