This measure comes after an initial reduction in these contributions in its fall budget presented by the government in November.
While presenting details of the broad outlines of the budget on Wednesday afternoon in Parliament, British Finance Minister Jeremy Hunt explained that in order to raise money to finance this measure, in particular, the imposition of an exceptional 35 percent tax on the profits of oil and gas producers will be extended for a year, or until 2029. It will be implemented in 2022 amid rising energy prices.
Hunt said in his speech, clips of which were sent to the media, that “the British economy has recently faced a financial crisis, a pandemic, and an energy shock resulting from a war on the European continent.”
But the Chancellor of the Exchequer, which is another title for the Minister of Finance, also confirms that the British economy is in a better position, noting that “thanks to the progress achieved (…) we can now help families through permanent tax cuts.”
“The Conservatives realize that lower taxes mean higher growth,” Hunt adds.
Inflation, which reached 4 percent in January, has declined since its peak (11 percent) at the end of 2022, but it still represents double the target set by the Bank of England. On the other hand, the United Kingdom entered a recession at the end of 2023.
Despite the record budget surplus in January, public finances were in a worse position than expected at the beginning of the year. Public sector debt amounts to about 96.5 percent of gross domestic product, a percentage not recorded since the early 1960s.
General elections are supposed to be held during the current year, while the opposition Labor Party is ahead by a large margin over the current ruling Conservative Party in opinion polls.
“This Budget should be the final chapter in 14 years of economic failure under the Conservatives,” said Rachel Reeves, chief economic officer for the opposition Labor Party.
For her part, Sarah Coles, an analyst at Hargreaves Lansdowne Group, said, “Any tax cut is welcome, with fees swallowing a large portion of the gross domestic product.”
She pointed out that the new reduction in social security contributions could save Britons an average of 450 pounds annually and deprive the state treasury of ten billion pounds.
She added that the first reduction in these contributions in the fall “did not make a significant difference in the opinion polls,” so its impact on the elections is not certain.
These tax cuts raise fears that the government will resort to cutting the budgets of already strained public services, such as the judiciary, the police, and the National Health Service system.
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