Jeremy Hunt delivered a positive Budget that included a PS9bn tax cut for businesses, an extension to free childcare and a surprise pension increase for the well-off.
On Wednesday, the chancellor claimed that Britain’s economy was “proving doubters wrong” and announced a 100% tax cut for business investment in an attempt to boost the country’s slow growth rate.
His first Budget included two major measures to keep people employed: an extension of child care by PS5bn in England, and controversial elimination of the lifetime allowance for tax-free pension contributions.
Labour leader Sir KeirStarmer stated that the pensions tax breaks were a “huge giveaway” to some of the country’s wealthiest citizens. He claimed that a PS2mn pension fund would give a PS275,000 tax cut for a high-earner.
Some Tory MPs are still advocating for greater tax cuts. Britain’s tax burden will rise to a postwar high of 37.7 percent of GDP in 2027. Most people praised Hunt at a private meeting following the Budget.
Hunt arrived at the House of Commons with updated official forecasts that showed the UK would not experience a technical recession by 2023. He claimed that the plan was working. “The optimists and declinists have it wrong.”
Hunt stated that he had restored economic stability following the chaos caused by the Liz Truss premiership in 2012, and that inflation was under control with confidence returning.
Hunt was pleased to receive new forecasts by the Office for Budget Responsibility. These showed a better outlook for the UK economic. This is partly due to the chancellor’s efforts to get people back into work. The fiscal watchdog stated that lower natural gas prices had a greater impact, which helped to limit the cost of living.
The forecast details show that the economy will not contract by 1.4% this year. Instead, it will shrink by only 0.2% before recovering to a growth rate of 1.9% annually by 2027.
Hunt’s measures amount a gift of PS20bn per year for the next three years, before falling to PS10bn per year. Due to the handouts and lower growth towards end of forecast, public sector debt will only begin falling as a percentage of gross domestic product in 2027/28. This highlights the precarious state the government finances are still in.
Hunt concentrated most of his fiscal firepower in tax breaks to business. He claimed that this would increase UK investment as well as offset an increase of 6 percentage points in corporation tax.
A three-year “full expense” scheme was announced by Hunt, which allows companies to immediately deduct 100% of any plant or machinery investment when calculating taxable profit. Hunt stated that Britain was the only European country to have such a system.
Hunt’s promise to combat inactivity on the British labour market was also key to the Budget. He delivered a variety of measures to convince parents, the disabled, and the over-50s to return to work or increase their hours.
His employment plan included a PS5bn expansion for free childcare in England for children under one and two years old. This was an attempt to reduce living costs as well as to help mothers stay at work.
Separately, the government opened up the labour market to more foreign workers. This included putting construction workers on a “shortage occupation” list. Later in the year, other sectors may be added.
The chancellor confirmed that he would keep the PS2,500 energy price guarantee for three more months starting in April. This PS3bn move will prevent a rise in domestic energy bills during springtime.
In the latest concession to motorists, a cut in gasoline duty will be maintained. The rate will also be frozen at a cost of PS5bn to the exchequer.
Paul Johnson, of the Institute for Fiscal Studies, questioned whether the money could have been used to fund pay deals in the public sector on the day when the UK was experiencing its largest strikes during the current period.
Starmer claimed that the government had left the country on a “path to managed decline” and that Wednesday’s Budget “changes absolutely nothing”.