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Conservative Government to Cut Taxes in Bid to Win Favor and Avoid Inflation Worsening

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Conservative Government to Focus on Tax Cuts and Inflation Control in Budget Statement

Britain’s Conservative government is set to unveil its budget statement on Wednesday, with a focus on cutting taxes and controlling inflation. The budget comes ahead of a likely national election next year, with opinion polls suggesting that the Conservatives may face defeat.

Prime Minister Rishi Sunak has indicated that tax cuts are back on the agenda now that his self-imposed target of halving inflation this year has been achieved and government revenue is higher than expected. In a recent speech, Sunak raised expectations that Treasury chief Jeremy Hunt’s autumn statement will include measures to reduce the tax burden in the UK, which is currently at its highest point in 70 years due to the impact of COVID-19 and the energy price spike caused by Russia’s invasion of Ukraine.

Sunak emphasized that the government aims to “cut tax and reward hard work” but will be cautious not to jeopardize progress in controlling inflation. In October, inflation eased to 4.6% from a year earlier after reaching a 41-year high of 11.1% in the same month of 2022.

Sunak became prime minister in October 2022, following Liz Truss’s short-lived premiership, which saw financial markets in turmoil due to a series of unfunded tax cuts. Sunak pledged to stabilize the British economy after this period of uncertainty.

Hunt’s budget statement is expected to prioritize measures to boost business investment and encourage the long-term sick to return to work. However, this move may attract criticism over its potential impact on society’s most vulnerable. Hunt stated that the focus will be on “how we boost business investment and get people back into work to deliver the growth our country needs.”

While many voters are interested in potential cuts to personal taxes, it remains to be seen whether Hunt will address this issue in his autumn statement or wait until the main annual budget statement in the spring. The latter could serve as a launchpad for a general election. Speculation has also arisen regarding the possibility of an inheritance tax cut, which would primarily benefit the wealthy. However, with only a small percentage of estates currently subject to inheritance tax, such a move would likely be met with backlash during a time of cost-of-living concerns.

The general election must take place by January 2025, with predictions suggesting it may occur in May or the fall. Recent opinion polls have consistently placed the governing Conservative Party, which has been in power since 2010, behind the main opposition Labour Party.

Experts have warned that with stretched public finances, modest economic growth, and inflation well above the Bank of England’s target rate, the government has limited room for maneuver. Kallum Pickering, senior economist at Berenberg bank, suggested that Hunt may hope for an improvement in the economic backdrop ahead of his next budget in spring 2024 to give a quick boost to the economy before the voting begins.

Bank of England Governor Andrew Bailey cautioned that the battle against inflation is not yet over. The bank has raised interest rates significantly in recent years to curb spending and inflation, which are now at a 15-year high. Cutting personal taxes could potentially complicate the journey towards reaching the bank’s target inflation rate of 2% by stimulating consumer spending and further increasing price pressures.

As the budget statement is unveiled, all eyes will be on the government’s plans to balance tax cuts with inflation control and address the concerns of the general public.

More detail via Daily Mail Online here… ( Image via Daily Mail Online )

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