© Reuters. FILE PHOTO: British Chancellor of the Exchequer Rishi Sunak speaks at Conservative Party Spring Conference in Blackpool, Britain March 18, 2022. REUTERS/Phil Noble
LONDON (Reuters) -British finance minister Rishi Sunak cut taxes for workers and reduced a duty on fuel on Wednesday as he sought to soften a severe cost-of-living squeeze against the backdrop of fast-rising inflation and slowing economic growth.
Announcing a half-yearly budget update in parliament, Sunak said he was increasing the threshold at which workers start to pay national insurance, or social security, contributions by 3,000 pounds ($3,958.50) this year.
“That’s a 6 billion pound personal tax cut for 30 million people across the United Kingdom,” he said, adding the cut was equivalent to more than 330 pounds a year per worker, making it the largest single personal tax cut in a decade.
But Sunak stuck to his plan to increase national insurance contributions from next month, part of his plan to fund more spending on health and social care after the COVID-19 pandemic.
In his Spring Statement, he announced a reduction of one pence in the pound in the basic rate of income tax in 2024 while a cut in fuel duty of 5 pence per litre would start later on Wednesday and last until March next year.
Sunak and Prime Minister Boris Johnson have been under pressure, including from lawmakers within their Conservative Party, to do more to help households as they struggle with the rising cost of living.
Sunak announced new forecasts showing the British economy will grow more slowly this year than previously predicted, hit by uncertainty caused by Russia’s invasion of Ukraine, and that inflation will be much higher.
The forecasts drawn up by the Office for Budget Responsibility (OBR) showed the economy was likely to grow by 3.8% in 2022, a sharp slowdown from a forecast of 6.0% made in October.
Inflation, as measured by the consumer price index, is now seen at 7.4% in 2022, compared with October’s forecast of 4.0%.
Earlier, data showed Britain’s consumer price inflation hit a 30-year high of 6.2% last month, driven by soaring costs for energy and food, which poorer households especially may find hard to cut back on.
The OBR forecast that gross domestic product would grow by 1.8%, 2.1% and 1.8% in 2023, 2024 and 2025.
In October, the OBR had forecast growth of 2.1%, 1.3% and 1.6% over the next three years.
($1 = 0.7579 pounds)
UK’s Sunak cuts taxes to soften cost-of-living hit
Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.