United Kingdom announces tax cuts and pension increases before elections

He British government revealed this Wednesday its fiscal plan for the coming months, which includes a drop of two points, to 10%, in the social contribution, an increase in pensions by 8.5% and an increase in the main social subsidy, Universal Credit, by 6.7%.

In a statement before Parliament, the Minister of Economy, Jeremy Huntdetailed its strategy in the so-called Autumn Declaration, marked by a general reduction in taxes on citizens and companies, before the next general elections are held in 2024.

However, as the opposition was quick to denounce and confirmed by the very body that supervises public accounts, the Office for Budget Responsibility (OBR), the entire fiscal pressure in the country will rise even more, since the tax brackets are not raised. income tax in the face of the general rise in salaries.

According to Hunt, the reduction in workers’ contributions to the so-called National Insurance (social security) will come into force from January and will affect 27 million people who earn salaries of up to 50,270 pounds (57,750 euros), who will save an average of 450 pounds (516 euros) per year.

The Executive will also cancel the social security contribution for the self-employed, according to Hunt, which will raise pensions starting next April by 8.5% and will also raise the main social subsidy, Universal Credit, by 6.7%.

In addition, housing aid will be increased for the less wealthy population, which will imply an additional 800 pounds per year (920 euros) for 1.6 million people.

At the same time, he announced reforms in the social protection system to reduce the number of people who do not work due to long-term sick leave or disability, currently about 2.6 million, so that they lose their subsidies if they do not participate in training to return to the market. labor.

Regarding companies, the minister assured that this is the largest tax reduction for companies in a decade, with measures such as the extension for one year of the 75% tax relief in real estate rates for retail trade, hospitality and leisure.

He also confirmed that tax benefits for free zones will be extended for five more years, until 2030.

The secretary in the Parliament of British treasureCharlotte Vere, insisted today in a meeting with the media that these measures, which are “the largest package of tax cuts introduced since 1988”they suppose “a very good strategy for the growth” of the country and “they are exactly what the British economy needs right now.”

Forecasts for the coming years

The OBR anticipated, Hunt said, that the country will reach its inflation target of 2% by 2025, compared to the current 4.6%, while it will be able to reduce debt progressively and its economic growth in 2023 will be 0.6%.

Annual inflation is forecast to decline to 2.8% by the end of 2024 before falling to 2% the following year, while the Gross Domestic Product (GDP) It will grow 0.6% this year, 0.7% in 2024, 1.4% in 2025, 1.9% in 2026 and 2% in 2027.

What Hunt did not say, and was reminded by the Labor opposition, is that these growth forecasts represent a significant decrease compared to what the OBR itself calculated last March: an increase of 1.8% in 2024 and 2.5% in 2025. .

Regarding debt – at 97.8% of GDP – the Office of Budget Responsibility anticipated that it will drop in 2024 to 91.6% of GDP, but between 2024-25 it will be 92.7% of GDP and between 2026-2027 93.2% of GDP. GDP.

In this way, the Government will have met its debt reduction objectives in five years, according to the minister.

The head of Economy of the Labor Party -first opposition group-, Rachel Reeves, there are “27 OECD economies that have grown faster than the British during the last 13 years of Conservative leadership.

Reeves regretted that the fiscal announcements of the Minister of Economy will make citizens “worse” of how they were.