Britain’s Conservative government is expected on Wednesday to use a budget update to unveil tax cuts for millions of workers in a bid to woo voters ahead of a general election.
Prime Minister Rishi Sunak’s party, in power since 2010, is trailing the main opposition Labor Party in the polls and looks likely to step down.
But voter-friendly measures to win support are likely to be limited, analysts said, with government coffers constrained by persistently high inflation and the UK economy in recession.
Chancellor of the Exchequer Jeremy Hunt’s latest plans for tax and spending will be presented in a speech to MPs in parliament at around 12:30 GMT.
Mr Sunack hopes the measures will help the Tories close the gap with Keir Starmer’s revived Labor Party ahead of the election.
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But with centre-left Labor holding a clear lead in the polls from October 2022 and the gap currently around 20 points, Sunak has a mountain to climb.
“We can cut taxes”
According to excerpts of his budget speech released to the media, Hunt was to say that “under Conservative governments since 2010, growth has been higher than any major European economy”.
He will add: “Of course, interest rates remain high as we reduce inflation.
“But because of the progress we’ve made … we can now help families with permanent tax cuts.”
British media reported that Hunt would announce a cut to national insurance (NI), a payroll tax paid by workers and employers.
The move will mirror action taken by the government in its last budget in November.
“Jeremy Hunt may have decided this is all he can afford to offer at the moment,” said Sarah Coles, head of personal finance at Hargreaves Lansdown.
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It added that around 27 million people would have an average of £450 ($573) more disposable income a year from the reported cut in NI.
“The question will be whether a big tax cut is enough to move the table in a general election,” Coles said.
Economists have warned that the tax cuts will hurt investment in key public services, such as the NHS and schools, which already have shrinking budgets.
While UK inflation is easing, the current annual rate of four per cent is still twice the Bank of England’s target.
The central bank raised interest rates to a 15-year peak of 5.25 percent to curb inflation after it soared to its highest level in more than four decades at the end of 2022.
The cost of living crisis has worsened as commercial banks impose their own interest rates on loans, including mortgages.
“Change is needed”
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British media reports say the Tories could also use the budget to steal from Labour, should they win the election, by removing a loophole that would have allowed Britain’s wealthiest residents to cut their taxes.
The Labor Party has pledged to end the loophole that allows non-residents, who live in Britain but are domiciled abroad, to avoid UK tax on income they earn abroad.
Speaking on the eve of the Budget, Labour’s finance spokeswoman Rachel Reeves said Britain “needs change, not another failed budget or the risk of… more years of Tory chaos”.
“Only Labor has a long-term plan to deliver more jobs, more investment and improve workers,” he added.
Reports also suggest Hunt could introduce a new levy on vaping, which is already the subject of a heavy crackdown by Sunak’s administration.
Source: AFP