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UK chancellor Jeremy Hunt has presented a “Budget for long-term growth”, as the Conservative government tries to reduce its deficit in the polls ahead of a general election expected this year.
Hunt on Wednesday announced a reduction in national insurance contributions paid by workers. The cost will be partially offset by the abolition of the “non-dom” tax regime and other tax increases. Economic growth for 2024 was forecast at 0.8 per cent.
Main policy announcements
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National insurance A 2p cut in the main rate of employee and self-employed contributions for 27mn workers, costing about £10bn a year. It follows an earlier 2p cut announced in last year’s Autumn Statement.
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“Non-dom” tax regime Abolition of the system, which allows UK residents who have their permanent “domicile” abroad not to pay UK tax on overseas income or investment gains. New arrivals will be given a four-year tax-free period for overseas income. The change will eventually generate £2.7bn annually.
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Child benefit Income threshold at which the benefit is tapered will rise from £50,000 to £60,000.
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British Isa An additional £5,000 allowance for Individual Savings Accounts that can be invested in UK equities. The measure, which is in addition to the existing £20,000 per person annual Isa allowance, is aimed at boosting investment in domestic businesses.
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Tax rises New or increased taxes on vapes from 2026, tobacco and non-economy class flights. Tax breaks for owners of holiday lettings will be scrapped and the windfall levy on oil and gas producers will be extended by one year to 2029.
Economic forecast
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Economic growth The Office for Budget Responsibility forecasts the economy will expand by 0.8 per cent in 2024, largely unchanged from the 0.7 per cent expected in November and well below the 1.8 per cent predicted in March 2023. It upgraded the forecast for 2025 to 1.9 per cent from 1.4 per cent expected in November and to 2.2 per cent in 2026 from 2 per cent previously forecast.
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Inflation Price growth is expected to slow below the Bank of England’s 2 per cent target in a few months, Hunt said. Across 2024, inflation is set to average 2.2 per cent this year, down from 3.6 per cent previously forecast.
Fiscal outlook
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Day to day Spending increases by 1 per cent a year in real terms over the next parliament, but “spent better,” according to the chancellor as he announced a NHS productivity plan.
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Chancellor’s fiscal rules Hunt’s main fiscal rule of public sector debt as a percentage of GDP falling in the fifth year of a five-year forecast period is expected to be met with a £8.9bn “headroom”, a smaller figure than the 2010-2023 average of £29.7bn.