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Jeremy Hunt is preparing to submit his first budget proposal in mid-March, raising questions about how he plans to grow the economy, marking 100 days at the Treasury Department over the weekend. .
The Chancellor was appointed to his post by Liz Truss in a desperate ruse to save her own job at the expense of the career of her good friend and closest ally, Kwasi Kwarten.
From the outset, Hunt made it clear that balancing the finances and restoring stability was a priority when he arrived at the Treasury Department following the dramatic market turmoil.
Rishi Sunak, fearing further disruption to the market, had no choice but to keep him as prime minister rather than install ally Steve Barclay as he had originally planned. The two men worked closely together on a fall statement that confirmed plans to reverse nearly all of Mr Truss’ economic policies, laying out plans to curb spending and raise tax revenues.
Hunt’s intentions for the March 15 budget are to illustrate how to encourage economic growth, but he rejects the idea of stimulating growth through tax cuts, as Truss supporters like. It’s a schedule.
In a key address Monday, head of the CBI business group Tony Dunker backed the government’s position on taxes, arguing the debate was just a sideshow of what really matters to the economy, but halted. The UK is in a ‘low growth trap’.
He is expected to say: “Denying where our economy is now compared to international competitors will make Britain’s growth prospects worse over the next decade. The current CBI forecast is that the prime minister will deliver on his pledge to grow the economy by 0.1% by the end of the year, but my contention is that today’s policy will deliver 0.1% growth. If we aim, it’s the best we’ve ever achieved.”
Dunker adds: The UK’s problem of low business investment is structural, not behavioral. ”
He proposes changes to the tax system that would allow companies to immediately deduct the full cost of their investment from their tax bills, encouraging them to invest capital in projects that will increase their productivity over time.
In his speech, the CBI director also called for fine-tuning taxes and regulations to promote green growth and resolve the labor shortages that are hindering businesses.
As important as the measures contained in the budget itself are, revised economic and financial forecasts are produced by the Office of Budget Responsibility (OBR). When the fall statement was revealed, the only question was how big a black hole OBR would find in its finances. This time, Hunt hopes for more positive news.
Global gas prices have plummeted in recent weeks, and this will have mixed ramifications for the Treasury Department. The cheaper wholesale gas, the less money the Treasury will have to spend to cap the price households pay. At the same time, less money will be raised by windfall taxes on energy producers. But sources close to Hunt stressed that lower gas prices would be a tangible benefit to the economy, boosting the amount of money brought in as taxes.
Another question facing the Prime Minister is whether we should finally end the pretense that fuel taxes are still automatically rising every year. For more than a decade, the Treasury Department has burned that assumption into its fiscal scorecard – but with every budget, that year’s tax “increase” has been canceled and the prime minister of the day finds another source of income. , are forced to accept the increase in debt.
In a new report, the Commons Finance Commission said fuel tariff policy had become a “fiction” and urged Hunt to accept that taxes don’t actually default to increasing each year. Harriet Baldwin of After years of fiscal forecast fiction, it’s time for the government to more accurately reflect the actual path of fuel taxes. ”
Even with a renewed focus on growth, both the Conservatives and Labor parties claim they are the only ones who can trust that borrowing will not spike again, and the path to next year’s general election is on the path to fiscal stagnation. It is very likely that the debate about reliability will continue.
Labor Prime Minister Rachel Reeves has refused to make spending promises that do not match increased tax revenues. He is keen to ensure that only he does the job after 2022, the year of the four prime ministers, 2023 and beyond.