Budget 2024: UK economy is on the right track, claims Sunak

The government is preparing for the Budget which may include tax cuts but also a squeeze on spending.
Budget 2024: UK economy is on the right track, claims Sunak
Prime Minister Rishi Sunak at a former Honda factory in SwindonPA Media

The UK economy is getting “on the right track”, claimed Rishi Sunak ahead of what could be his government’s final Budget before the general election.

The prime minister spoke as the chancellor prepared for Wednesday, when he is widely expected to announce tax cuts but has cautioned it will be a “prudent and responsible” Budget.

Downing Street denied that Mr Sunak thinks Jeremy Hunt “lacks imagination”.

The UK fell into recession last year and has less room for Budget giveaways.

During a site visit to a former Honda car factory in Swindon, Mr Sunak said that its transformation into a logistics hub by industrial property developer Panattoni was a “huge vote of confidence in the UK”.

“It shows that the work we’re doing to get the economy on the right track is paying off,” he said.

“Now, I’m determined, as prime minister, to make sure that the UK is the best place in the world to invest and grow a business like this,” he added, referring to an investment package announced by government to boost spending by firms working on cutting-edge technologies and manufacturing.

But experts have questioned how much help Mr Sunak and Mr Hunt will be able to give households and businesses at Wednesday’s Budget.

The Office for Budget Responsibility (OBR), the government’s independent economic forecaster, had previously estimated the chancellor would have about £30bn of “headroom”. This is under a fiscal rule set by the Tory government to meet a self-imposed target of debt falling as a percentage of national income in five years’ time.

But since then, borrowing costs have risen and Mr Hunt admitted at the weekend that the forecasts on what headroom he has available has “gone against us”.

Also, official figures have confirmed that the UK economy entered into a recession at the end of last year.

Although Bank of England governor Andrew Bailey has suggested that the recession may already be over, tax rates remain at historic highs and many households are struggling with higher mortgage costs as they come to renew their fixed-rate deals.

Total UK tax take . As a % of the size of the economy.  Figures from the time of Autumn Statement 2023.

Meanwhile, Mr Hunt is facing is facing pressure from within his own party to unveil a pre-election giveaway on Wednesday.

On Monday, the chancellor repeated his desire to to move towards a “lower-tax economy” but in a “responsible” way, ruling out borrowing to pay for cuts.

He is expected to announce tax cuts but at this stage it is not clear whether he will reduce National Insurance for a second time or trim income tax.

Pre-Budget analysis by the Institute for Fiscal Studies think tank suggested that these would be partially paid for by future spending cuts in unprotected departments like local government and further education once inflation is accounted for.

Mr Hunt would not be drawn on whether he would announce a clampdown on non-doms. “You’ll have to see on Wednesday precisely what I’m going to announce,” he said.

The chancellor at a Siemens factory in Wiltshire, which announced a £100m investment for a new design and manufacturing centre in Chippenham, specialising in railway signalling equipment.

Meanwhile in London, Downing Street had to deny reports that emerged over the weekend that Mr Sunak was frustrated with Mr Hunt and sees him as “timid”.

The prime minister’s official spokesman said: “The chancellor is working very closely with the prime minister to deliver our plan for the economy and obviously the chancellor will be setting out further measures in line with that on Wednesday at the Budget.”

Asked if Mr Sunak, a former chancellor during the coronavirus pandemic, had been a “backseat driver” in preparing the Budget, his spokesman said: “No.”

Source: bbc.co.uk

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