The UK will not enter a technical recession this year, inflation will ease to 2.9 per cent by the end of 2023 and underlying government debt will be 92.4 per cent of GDP next year, ahead of drop by three percentage points within five years. These are just some of the statements made today by the Chancellor of the Exchequer, Jeremy Hunt, during the presentation of his Spring Declaration, the update of the budget and economic outlook, in the House of Commons. “On the subject of massive challenges, I report today on a British economy that is proving doubters of a recovery wrong.” Hunt said improving global conditions and the actions taken by the new government after former Prime Minister Liz Truss’s disastrous “mini-budget” meant the UK was recovering economically. Targeting mainly businesses making a profit of more than £250,000 (about 286,000 euros) with a corporate tax hike from 19 to 25 per cent, Hunt announced several measures to support citizens against the cost-of-living crisis , openly stating its goal of getting the 3.5 million people of pre-retirement age who are currently no longer part of the workforce back into work.
In an eye-catching bid to lure over-50s who have taken early retirement into work, the chancellor has indeed unveiled generous changes to pension taxes. First, he abolished the lifetime allowance for tax-free retirement savings – the maximum amount workers can put into their pension funds before being taxed – instead of simply raising the threshold, as was intended. Hunt also announced an increase in the annual allowance – the amount people can save each year without incurring a portion of it in taxes – to £60,000 (about €68,000), stating that “no one should be excluded from the workforce for tax reasons”. Also to consolidate the UK workforce, Hunt also announced changes to childcare, a major burden for parents returning to the office.
The Chancellor of the Exchequer has thus extended free childcare to all children aged nine months to four years, offering parents an extra 30 free hours a week. Further funding will also be made available to schools to provide “wrapped” care so that all “parents of school age can drop their children off at school between 8am and 6pm,” the chancellor said. Those changes, according to Hunt, will reduce childcare costs for families by nearly 60 percent.
Two Other Highly Topical Issues
In his Spring Declaration, Jeremy Hunt touched on two other highly topical issues: defense and energy. After some wrangling within the Conservative Party itself, Hunt announced today that the UK defense budget would increase by £11bn over the next five years; the same amount that Ben Wallace, defense minister, had requested from Prime Minister Rishi Sunak to deal with the new threats arriving from Russia and China. Hunt also said the government aims to increase defense spending to 2.5 percent of GDP (compared to NATO’s minimum of 2 percent) when economic and fiscal circumstances allow.
As for the energy sector, however, Hunt said that the Energy Price Guarantee (EPG), which subsidizes household energy costs above a certain threshold, has been extended for another three months, thus limiting the gas and electricity rates so that the typical household bill does not exceed £2,500 a year. Under the EPG, the government effectively limits household costs and reimburses energy companies for the difference between this and the cost of purchasing power on wholesale markets.
The fuel tax increase, scheduled for this April, has also been postponed again for another 12 months. Also in the energy sector, Hunt announced the launch of Great British Nuclear (GBN), a new body that will help energy companies find suitable sites for nuclear power plants and develop critical supply chains. For the chancellor, GBN would have the task of ensuring that 25 percent of British electricity comes from the nuclear sector by 2050, as set out in last year’s energy security strategy.
Of course, there was no lack of criticism of Chancellor Hunt’s plan. For example, both the Labor Party and the Scottish National Party have blamed the Conservatives for failing to address the country’s long-term economic decline.
Indeed, Labor have pointed out that, according to data, the UK is the only G7 economy that has not returned to its pre-pandemic level, with real household disposable income remaining below its 2019/20 level. and will continue to do so for the next four to five years. However, at the end of the Spring Declaration, the Office for Fiscal Accountability, the UK’s tax watchdog, announced that the country’s economic and fiscal outlook had improved since its previous forecast in November; noting that “the short-term economic downturn should be shorter and shallower; medium-term production will be higher; and the budget deficit and public debt will be lower”.
This article is originally published on agenzianova.com