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Montevideo, March 1st 2024 - 23:10 UTC

 

 

Tories preparing for elections, “cut taxes to help businesses and boost economic growth”

Thursday, November 23rd 2023 - 14:34 UTC
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Jeremy Hunt said he had decided to tax some cuts because inflation had eased and forecasts showed reduced borrowing. Jeremy Hunt said he had decided to tax some cuts because inflation had eased and forecasts showed reduced borrowing.

Election blues in Britain, the general election must be held before the end of January 2025, but the prime minister can call it earlier. And in effect, the ruling Conservatives claimed this week they had delivered the biggest tax cuts in decades in a move to boost the UK's stagnant economy and lift incomes.

But Chancellor of the Exchequer Jeremy Hunt on Wednesday, addressing the House of Commons had to deny an election intention in the announced tax cuts and measures to improve incomes.

Hunt said “contrary to speculation” about a spring general election, “we didn't choose the crowd-pleasers, the inheritance tax or income tax cut”.

The chancellor argued he instead chose “tax cuts that are going to help businesses” and stimulate economic growth.

The promise to cut National Insurance for millions at the beginning of January, rather than by April as is standard after an Autumn Statement, has fuelled speculation of a potential May election.

For weeks before the Autumn Statement, Mr Hunt had repeatedly insisted that tax cuts were “virtually impossible” given the dire state of the nation's finances.

But in his statement, Mr Hunt said he had decided to tax some cuts because inflation had eased and forecasts showed reduced borrowing.

In a decision affecting 27 million people, the chancellor said he would cut the main rate of National Insurance from 12% to 10% from 6 January.

The chancellor said the reduction “means someone on the average salary of £35,000 will save over £450 a year”.

“After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track,” Hunt said. “Rather than a recession, the economy has grown. Rather than falling as predicted, real incomes have risen. Our plan for the British economy is working. But the work is not done.”

Hunt also said UK's economy was now forecast to grow by 0.6% this year, rather than shrink by 0.2% as previously predicted. However, predictions for 2024 economic performance were simultaneously revised downwards, to 0.7% growth from a previous estimate of 1.8%.

Opposition Labour has backed the chancellor's National Insurance reduction, but say workers will be paying more tax at the next election than the last.

Labour's shadow chancellor Rachel Reeves said Autumn Statement did not “remotely compensate for the tax increases” already announced by the government.

Mr Hunt's decision last year to freeze the level of income at which workers start paying National Insurance means millions will be dragged into paying higher rates or be forced to pay the tax for the first time.

The Autumn Statement's £20bn of tax cuts compare to about £90bn being raked in by tax changes announced last year, according to the Resolution Foundation think tank.

The think tank says tax as a share of GDP is forecast to rise by 4.5 percentage points between 2019-20 and 2028-29 - the highest level in 80 years.

With elections probably next year and the Conservatives trailing the opposition Labour Party by as much as 20% in some opinion polls, the government is seeking to show flexible fiscal policies

Categories: Economy, Politics, International.

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