On March 6, the UK chancellor will unveil his annual budget, offering Conservatives one last opportunity to introduce voter-pleasing tax changes before general elections take place. He has entrusted OBR with creating an economic and fiscal forecast.
OBR now forecasts that the economy is on course to avoid recession; however, growth should still slow.
Tax cuts
Next week, the Chancellor will unveil tax changes as part of his spring budget address. Much speculation has focused on inheritance tax cuts and support for first-time buyers – both measures would likely have only limited effects on voters as Conservatives are trailing Labour by 20 points in polling; to significantly change minds would require significant giveaways.
In his Autumn Statement, the chancellor of the Treasury extended tax breaks for businesses while cutting National Insurance contributions; but this did not prevent taxes from reaching their highest share of GDP since 1940.
The chancellor’s decision to move up the National Insurance cut deadline from April to January stoked speculation of an early election and failed to rule out holding its set-piece fiscal event sooner than March, fueling Westminster rumor mill speculations further. Yet an earlier election would not provide enough time for implementation of big ticket tax cuts that might win back voters.
Nuclear power
Chancellor Hunt has confirmed the spring budget will take place on March 6 and entrusted the Office for Budget Responsibility with providing forecasts on economy and public finances.
Its timing adds fuel to rumor that the chancellor may be gearing up for a general election that must take place by January 2025, where Labour trails the Conservatives by about 20 points nationally in polling data. As housing and tax issues remain top of voters’ minds, an appealing promise might help attract them back into Conservative camp.
The Chancellor will likely go ahead with plans to increase corporation tax from 19% to 25%, following Liz Truss’ flip-flopping on this matter. While it should provide good news for businesses, it may displease Conservative backbenchers concerned about party reputation. In addition, an AI sandbox should be announced which allows firms to develop cutting-edge technologies freely; plus there could be incentives available from classifying nuclear energy as environmentally sustainable according to EU green taxonomies – creating investment incentives.
Artificial intelligence
Budget announcements held early March leave open the possibility of an early election; most Westminster observers expect Prime Minister to call one in fall instead. But speculation over the Chancellor’s move to set National Insurance cuts for January fueled speculation that Tory lawmakers are trying to boost their campaign with giveaways in order to win votes ahead of an expected General Election next fall.
Downing Street is also said to be contemplating cutting inheritance tax for wealthy households; but Liberal Democrat Treasury spokesperson Sarah Olney believes the spring budget looks more like “one last attempt by an embattled Conservative government”.
In addition to cutting taxes, the Chancellor plans to foster UK research into artificial intelligence. One measure will include awarding a prize of PS1 million annually for outstanding AI work, which could provide a boost for an already expanding sector. He has also proposed investment zones across England which target areas with strong scientific talent like Manchester, Liverpool and East Midlands universities and could receive investments of PS80 million each over five years.
Social care
Small businesses will likely welcome some of the planned tax giveaways, while others might argue they come too little too late. Many small businesses are struggling to survive amid rising energy and wage bills which place additional strain on them.
Some experts are also concerned that local enterprise zones could divert business activity away from “left behind” towns and cities into those within their catchment area. Furthermore, it remains uncertain if the money earmarked for social care will suffice in solving current systemic issues.
As the Tories trail in the polls, their chancellor will look for any eye-catching promises he can use as pre-election bait. According to observers, such measures might include breaking down barriers for first-time buyers by offering lower upfront mortgage costs or cutting inheritance taxes – measures likely to please voters but create division among Labour supporters.