Prime Minister Jeremy Hunt faces a difficult economic backdrop when he releases his autumn statement to the country on Wednesday.
Economic forecasts show growth has stalled and the UK teeters on the brink of recession, while high prices and the cost of living crisis continue to impact millions of households in poverty.
But Mr Hunt delivered some positive news last week after saying the economy had “turned the corner” after inflation had halved over the past year, raising hopes that he would announce tax cuts on Wednesday. I told you a little bit.
Looking ahead to next year’s general election, Tory backbenchers are especially keen for Mr Hunt to focus on policies that will ease household finances and reduce tax burdens.
Rishi Sunak on Monday said the government could “responsibly start cutting taxes”, doing little to dampen hopes that Mr Hunt would announce tax cuts within the next week.
The Prime Minister is expected to release his autumn statement on Wednesday
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What is the Autumn Statement and when does it start?
This is the Prime Minister’s main opportunity to make tax and spending announcements outside of the Budget, and Mr Hunt is expected to set out his plans in the House of Commons at around 12.30pm on Wednesday.
Tax cuts and economic growth
Mr Hunt promises to cut business tax, remove planning red tape and speed up access to the national grid.
The Times reported that 28 million people would receive a reduction in their National Insurance benefits, while reports suggested that the all-expenses system, which allows businesses to deduct from profits the cost of investing in new machinery and equipment, will be made permanent. are doing.
Support for entrepreneurs to raise capital, measures to “keep up with fast-growing industries” and policies to open up foreign direct investment, issues that have long plagued the UK economy. It will likely include measures to increase productivity.
“Taken together, we will increase business investment in the UK economy by around £20bn a year over the next 10 years, growing the UK,” Mr Hunt said.
Mr Hunt will also reportedly freeze alcohol tax and increase the state pension by 8.5% in line with the triple lock.
The statement comes as the Conservative Party’s fortunes plummet.
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The government has already announced a rise in the national living wage for around 3 million workers, who will rise from £10.42 to £11.44 from April, and the policy will only apply to those aged 21 and over, rather than over 23. It also applies to workers.
This means full-time living wage workers will see their annual wages rise by £1,800 next year, while hourly wages for 18 to 20-year-olds will rise by £1.11 to £8.60.
Inheritance tax reform
Mr Hunt is reportedly considering plans to cut inheritance tax, an idea that is hugely popular within his party but would only benefit some people.
Inheritance tax is currently levied at 40 per cent on estates over £325,000, with an additional £175,000 for principal residences passed on to lineal descendants. Hunt is reportedly considering cuts of 50%, 30% or even 20%. times.
The Conservatives are then said to be considering scrapping it completely as an election promise next year, which could cost them £7bn a year in the short term.
But the Institute for Fiscal Studies predicts that the tax increase could rise to more than £15bn by 2033.
Shadow Chancellor Rachel Reeves said cutting inheritance tax was “not the right thing to do” now.
Inheritance tax was paid on only around 4% of deaths in 2020/21, and the exemption meant many couples could inherit up to £1 million tax-free.
Chancellor Rishi Sunak will be hoping to turn his political fortunes around.
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profit reduction
The government has already announced a new welfare crackdown in a bid to get people back to work, but Mr Hunt could also squeeze the amount people receive.
Ministers have already announced that free prescriptions and legal aid will be cut off for benefit claimants who are deemed fit to work and are not looking for work.
Normally, ministers use September’s figures for inflation when raising working age benefits, which would mean a 6.7% rise.
But Mr Hunt did not rule out the possibility of adopting a much lower figure of 4.6% for October, which economists say would cut spending by around £3bn.
Asked about the potential move in an interview with the BBC, the Prime Minister said: “We will always be a caring Conservative government, but part of the way we make our economy successful is that businesses like this company “It’s about making sure we can find the people we need.”
“With nearly a million vacancies across the economy, we need to reform our benefits system.”
According to the Institute for Fiscal Studies, the savings will have a big impact on working-age households receiving disability benefits and means-tested benefits.
IFS research economist Sam Ray Chaudhry said: “Using October’s inflation rates instead of September’s to increase benefits would reduce the incomes of millions of low-income working-age people and require the government to It will save a lot of money.” Importantly, both effects will be permanent, regardless of whether the move to base annual benefit increases on October’s inflation rate is sustained thereafter.
“This means not only that actual benefit levels will take years to return to pre-pandemic values, but that the method of increase is so arcane and delayed that it is unlikely that they will return to their original levels without subsequent policy changes. It means never.”