LONDON – Britain’s Conservative government will on Wednesday unveil a vital budget update aiming to reinvigorate the economy and woo voters, as it lags badly in polls before next year’s expected general election.
There are rising expectations of tax cuts when finance minister Jeremy Hunt delivers the Tories’ taxation-and-spending plans before parliament at 1230 GMT, alongside the latest economic and fiscal forecasts.
Prime Minister Rishi Sunak was boosted last week by news that he has met his target to halve inflation, and won another lift on Tuesday after year-to-date borrowing undershot forecasts.
Yet the Conservatives are trailing behind the main opposition Labour party — whose leader Keir Starmer has benefited from public anger over a cost-of-living crisis which has eroded wages, sparked strikes and left millions of Britons struggling to pay bills.
However, Sunak and Chancellor of the Exchequer Hunt have cautioned against big giveaways despite recent falls in inflation, which remains elevated, and pressure from some parliamentary colleagues.
Yet Sunak promised this week to cut tax “carefully and sustainably” over time, after meeting his inflation-cutting target in October.
“We can’t do everything all at once. It will take discipline and we need to prioritise. But over time, we can and we will cut taxes,” he said.
He also vowed to crack down on welfare cheats to get more people back into work, and has pledged to invest £4.5 billion ($5.6 billion) in the auto, aerospace, green energy and life sciences sectors, among others.
‘NEXT PHASE’
Sunak declared Monday that he was able to move on to the “next phase” of the government’s economic plan after UK annual inflation slid to 4.6 percent last month from 10.1 percent in January.
At 4.6 percent, UK inflation remains the highest of the G7 world’s richest nations.
Expectations of tax cuts were heightened Tuesday when senior treasury official Laura Trott said “tomorrow we’ll be talking about growth, and about cutting taxes now we’re in a position when we can talk about cutting taxes”.
With another budget likely before the next election, economists said Hunt could either announce on Wednesday tax cuts that would take effect in the spring — or wait until the government’s fiscal update in March.
“With a general election looming, the Conservatives struggling in the polls, better-than-expected government finances and Sunak’s target to halve inflation already met, the Chancellor may resort to some vote-winning tax cuts,” said Victoria Scholar, head of investment at Interactive Investor.
It is widely rumoured that the government will announce cuts to inheritance tax and levies on home purchases, known as stamp duty.
Political analysts argue that such reductions could help the Conservatives win over voters, even if there is a greater call for cuts to income tax to help more people.
Cutting inheritance tax, or amounts levied on estates at death, would controversially benefit the wealthiest in society, while reducing stamp duty would be aimed at boosting Britain’s flagging housing market.
Food inflation remains in double digits, while households and businesses continue to pay high energy bills after the government scrapped last year’s subsidies.
Rents and mortgage repayments have soared for many following a series of Bank of England interest-rate hikes, which helped reduce decades-high inflation.
Another of Sunak’s big pledges has been to grow the UK economy — but heading into 2024 it remains at risk of recession after stalling in the third quarter of this year.