Amid mounting speculation in Westminster, Chancellor Jeremy Hunt is preparing to unveil his eagerly awaited Budget statement on Wednesday, against a backdrop of swirling rumours suggesting that Prime Minister Rishi Sunak may call a snap general election as early as May.
Under increasing pressure from Conservative Members of Parliament, particularly from Sunak himself, Hunt faces the formidable challenge of devising voter-friendly incentives to bolster the party’s flagging poll ratings.
Tax Reductions: Hunt is poised to reveal a 2-percentage-point reduction in National Insurance contributions for millions of workers, building on a similar reduction announced during last November’s Autumn Statement. Legislation is set to be expedited through parliament for implementation by April, with the government aiming for taxpayers to experience immediate impacts on their pay packets. This move, alongside previous NI reductions, is purportedly equivalent to a £900 tax reduction for the average worker. Nonetheless, this tax relief is set against the backdrop of an impending increase in the overall tax burden, poised to reach its highest level ever. Concerns also persist regarding the distribution of these benefits, with the Institute for Public Policy Research (IPPR) estimating that nearly half of the NI reductions would flow into the coffers of the wealthiest fifth of households.
Fuel Duty: In a bid to alleviate financial pressures on motorists, Hunt is expected to extend the 5p reduction in fuel duty, incurring a £5 billion cost to the Treasury. This extension maintains the duty at 52.95p per litre, a rate frozen since March 2011 by former Chancellor George Osborne.
Windfall Tax: Further financial injection into the Treasury is anticipated through an increase in the windfall tax imposed on oil and gas companies’ profits. Originally introduced in response to surging energy prices following Russia’s invasion of Ukraine, this levy has seen increments under Hunt’s stewardship, with a potential extension projected until 2029.
Scrapping Non-dom Tax Status: Amid considerations to adopt a Labour pledge, Hunt contemplates abolishing the non-domiciled (non-dom) tax status for affluent foreign residents. This potential move, disrupting Labour’s agenda close to the election, could inject £3.6 billion into Treasury coffers, diverting from the Labour-proposed NHS and education investments.
Vape Tax: In alignment with Sunak’s agenda to discourage smoking, Hunt explores the imposition of a new tax on vaping products, with rates varying based on nicotine content. This measure may coincide with a tobacco duty increase, ensuring vaping remains economically advantageous compared to traditional smoking.
Council Spending: In an effort to streamline expenditure, Hunt advocates for local councils to curtail spending on consultants and diversity initiatives. While such proposals resonate with right-leaning Tory factions, the Local Government Association (LGA) rebuffs these suggestions, citing minimal expenditures on such endeavours.
As the nation braces for Hunt’s Budget announcement, the implications of these proposed fiscal measures reverberate across political and socioeconomic spheres. While tax cuts and targeted levies aim to appease constituents, questions linger over the equitable distribution of benefits and the efficacy of proposed spending reductions. With a volatile political landscape and the looming spectre of a general election, Hunt’s Budget is poised to shape the contours of Britain’s economic trajectory for the foreseeable future.
