Jeremy Hunt, British Treasury chief, announced tax cuts on Wednesday for millions of workers. His Conservative Party hopes this move will help turn the political dial before a general election next year.
Hunt faces pressure from his colleagues, even though Britain’s economy is in recession and public finances are stretched. He wants to use his budget to reduce taxes.
The government hopes that putting money into people’s pockets amid a crisis in the cost of living will boost the Conservative Party’s ratings.
Elections must be held by January 2025 but could happen as early as May. Hunt’s boss, Prime Minister Rishi Sunak, will determine when the election occurs. Their party is trying to maintain control of the government they have held for the past ten years.
Hunt will tell the Parliament that Britain’s economy has survived the coronavirus outbreak and the sharp rise in energy prices after Russia invaded Ukraine. The Bank of England was forced to increase interest rates after the inflation spiked.
He plans to say that “interest rates will remain high while we reduce inflation. “We can help families now with permanent tax cuts because of our progress and because we’re delivering on the Prime Minister’s economic priorities.
Hunt, who met with King Charles III in Buckingham Palace to discuss the budget on Tuesday, will announce a cut of two percentage points for national insurance, a tax that 27,000,000 employees pay, from 8 percent to 8 percent. If this happens, he will cut the rate in November by the same amount.
Hunt is also rumored to be considering a reduction in the initial income tax rate. This reduction would also benefit savers and retirees but would be very expensive.
Any cuts will be funded by a combination of increasing taxes on vapes and business class flights, as well as a levy on oil and gas producers. It is also speculated that he will abolish the “non-domiciled tax status,” which allows wealthy individuals to avoid U.K. income taxes.
Sunak had previously stated that elections would likely be held in the second half of this year. Sunak, however, hasn’t ruled out an election this spring. The tax-cutting budget on Wednesday could be a launchpad.
Sunak and Hunt restored some economic stability following the short-lived Liz Truss premiership. Truss was ousted after a series of unfunded tax reductions roiled the financial markets and sent borrowing rates soaring.
The cost-of-living crisis is the worst in years for U.K. householders. Economists warn the tax burden is likely to remain at record levels, regardless of the budget’s outcome. This crisis is because the government will be recouping the hundreds of millions of pounds spent on the pandemic and the energy price shock.
