Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
UK chancellor Jeremy Hunt claimed that Britain’s economy has “turned the corner”, as his pre-election Budget put a £10bn personal tax cut at the heart of the Conservatives’ bid to overturn Labour’s polling lead and hold on to power.
In his last spring Budget before the election expected this year, Hunt partly funded a 2p cut in national insurance contributions for 27mn workers through a range of tax-raising measures.
He targeted “non-doms”, the oil and gas sector, business-class air travel and vapes, stealing some Labour policies in the process.
In one of the few unexpected policies announced on Wednesday, he raised the threshold at which parents are charged for claiming child benefit to £60,000 from £50,000.
The chancellor also found cash for traditional crowd-pleasers, including a further £5bn freeze in fuel duty and a freeze to alcohol duty.
The Budget is an attempt to shift Britain’s political narrative away from the cost of living crisis to a more optimistic outlook of economic recovery and rising real incomes.
But behind the upbeat rhetoric was a sombre backdrop of tax levels continuing to rise to a postwar record high and continued pressure on Britain’s creaking public services, which face years of further spending restraint.
“Because we have turned the corner on inflation, we will soon turn the corner on growth,” Hunt said. He added that inflation — which hit 11.1 per cent in October 2022 — would fall below its 2 per cent target in “just a few months’ time, nearly a whole year earlier than previously forecast”.
The Office for Budget Responsibility now says the UK will expand 0.8 per cent this year, up from the 0.7 per cent it forecast in November. The OBR also predicts 1.9 per cent growth in 2025, up from its previous estimate of 1.4 per cent.
The Conservatives are banking on signs of improvement in the economy to turn around Labour’s persistent polling lead. But almost £10bn in personal taxation cuts in November have so far failed to overcome the Tories’ 20-point deficit compared to Labour.
Despite Hunt’s announcements, taxes have steadily risen in recent years. Pre-Budget analysis from the Institute for Fiscal Studies and other think-tanks have suggested that the tax burden as a proportion of gross domestic product is set to hit new postwar highs over the next five years.
This is partly because of the impact of previously announced freezes to tax thresholds at a time of rising earnings and prices.
This is a developing story