London to announce tax cuts despite fragile budgetary health

Finance Minister Jeremy Hunt, who will speak to British MPs at midday, will be able to boast of public finances that are slightly better than expected and inflation that has fallen significantly. But economists warn that the room for maneuver is narrow.

– Economic pressures –

“We have taken difficult decisions to get our economy back on track,” Mr. Hunt will assure in his speech, according to statements sent to the press ahead of a budget presentation which “will boost economic growth in the United Kingdom, while by cutting taxes and continuing to bring down inflation.”

However, British activity, weighed down by 14 key rate increases by the Bank of England in its fight against inflation which have increased the cost of credit, is on the verge of recession. On the job market, job offers are becoming rarer.

But inflation fell sharply, to 4.6% in October, compared to more than 11% a year ago. Furthermore, British public borrowing is generally lower than expected for the current fiscal year.

However, “the improvement in the short-term budgetary situation” should prove ephemeral, warns Michal Stelmach, economist at KPMG, particularly given the prospect of interest rates which will remain permanently high, as suggested the Bank of England, and which should put activity and therefore tax revenues under pressure.

– “Rewarding work” –
On Monday, Prime Minister Rishi Sunak insisted: “I want to reduce taxes”. His promise to “reward people who work hard” fuels speculation about possible tax cuts for individuals, particularly on income or social contributions.

Conversely, one of the first measures announced ahead of the budget concerns a restriction of social assistance: the government plans “more severe sanctions” against people receiving benefits who are not looking for a job even though they are. could.

The government also confirmed that the minimum wage will increase next year, specifying that the increase will be nearly 10%.

Currently set at 10.42 pounds (twelve euros) per hour, it will be raised from April 2024 to reach 11.44 pounds (13.15 euros), which constitutes “the largest increase” ever recorded, assures the executive.

As the poorest households prepare for another difficult winter, NGOs are calling on the government to use the budget to reduce energy bills in particular.

– Pamper businesses –

Beyond political gestures towards households, the Chancellor of the Exchequer (official title of Finance Minister Jeremy Hunt) reiterated that his priority would go to businesses, whose investments he intends to boost in the British economy by around 20 billion pounds per year over the next decade.

Mr. Hunt is preparing to “support British businesses with 110 growth measures”, according to the elements of his speech: tax cuts, support for foreign investments or even reduction of administrative formalities are on the menu.

Among the announcements made over several days by the executive, it has already indicated that it will inject 4.5 billion pounds into eight industrial sectors including automobiles, aerospace, green energies and science. life in particular.

According to the Financial Times, Mr Hunt will notably make permanent a tax break of 9 billion pounds per year for businesses, which allows them to deduct certain expenses on equipment and installations from their taxable profits and was initially planned until 2026

Even if the government announces tax cuts, the tax pressure in the country will remain at a historically high level, boosted in recent years by expenses linked to the Covid-19 pandemic or the surge in energy bills after the war in Ukraine.

During the current legislature, which began at the end of 2019, “taxes will have increased more than in any legislature at least since the Second World War”, summarized Monday Paul Johnson, director of the Institute for Fiscal Studies (IFS) think tank.

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Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.