By Aysu Bicer
LONDON (AA) — The UK Chancellor Jeremy Hunt revealed the government's tax and spending plans on Wednesday, outlining key measures to bolster the economy, support businesses, and provide relief to citizens.
Announcing the government's economic priorities leading up to an upcoming general election next year, Hunt highlighted an improved fiscal outlook.
The government will reduce national insurance rates from 12% to 10% and implement what he called the most substantial business tax reduction in contemporary British history, adding that this would result in annual savings of £450 ($562) for the average worker.
Starting April 2024, the state pension is set to rise by 8.5%, reaching £221.20 per week.
The government affirmed its commitment to the triple lock mechanism for pensioners to receive a boost that outpaces inflation, average earnings growth, or a minimum of 2.5%.
Businesses also received positive news as Hunt announced the permanence of a tax break aimed at stimulating investments. This measure allows firms to save on corporation tax, providing an incentive for economic growth and stability.
"Our choice is not big government, high spending, and high tax because we know that leads to less growth, not more. Instead, we reduce debt, cut taxes, and reward work," he said.
However, the economic outlook comes with a sobering note.
The Office for Budget Responsibility predicted a slower-than-expected growth rate, forecasting a 0.7% expansion for the upcoming year, significantly lower than the previously anticipated 1.8%. Hunt acknowledged these challenges but expressed confidence in the government's ability to navigate the economic landscape.
Looking ahead, the office anticipates a decline in inflation to 2.8% by the end of next year, with a further decrease to the 2% target in 2025. This aligns with the government's commitment to maintaining stable prices and fostering a healthy economic environment.
"When the Prime Minister and I took office, inflation was 11.1%. Last week, it fell to 4.6%. We promised to halve inflation and we have halved it. Core inflation is now lower than in nearly half of the economies in the EU. And the OBR (Office for Budget Responsibility) say headline inflation will fall to 2.8% by the end of 2024, before falling to the 2% target in 2025," he said.
I will not take risks with inflation, and the OBR confirm that the measures I take today make inflation lower next year than it would otherwise have been," he added.