Chancellor delivers lower taxes, more investment and better public services in ‘Budget for Long Term Growth’

LONDON, 06 March 2024 /PRNewswire Policy/ --

‘Budget for Long Term Growth’ sticks to the plan by delivering lower taxes, better public services and more investment, while increasing size of economy by 0.2% in 2028-29 and meeting fiscal rules – taking the long-term decisions needed to build a brighter future.

-Economy turning a corner, with inflation expected to fall to target next quarter, wages consistently rising faster than prices and better growth than European neighbours.

-Chancellor capitalises on progress with ‘Budget for Long Term Growth’, sticking to the plan by putting over 900 pounds a year back into the average worker’s pocket thanks to changes at Autumn Statement and a second Employee National Insurance tax cut from 10% to 8% in April for 27 million working people.

-2 million self-employed also get a second tax cut through a further 2p reduction in the NICs main rate from 8% to 6% - saving the average self-employed worker 650 pounds when combined with cuts at Autumn Statement.

-Personal tax cuts since Autumn are worth 20 billion pounds, slashes the effective personal tax rate for an average earner to its lowest level since 1975, and will lead to equivalent of 200,000 more full time workers joining the labour market.

-High Income Child Benefit Charge to be assessed on a household-basis by April 2026, and immediate support for working families by increasing the threshold to 60,000 pounds and halving the rate at which Child Benefit is repaid – representing a 1,260 pounds boost on average for around half a million working families.

-The NHS in England will receive a 2.5 billion pounds day-to-day funding boost for 2024/25 and 3.4 billion pounds in capital investment over the forecast period to help unlock 35 billion pounds in productivity savings over the next Parliament by harnessing new technology like AI and cutting admin workloads - part of landmark Public Sector Productivity Plan to deliver better public services.

-The average car driver will save 50 pounds this year as the 5p cut and freeze to fuel duty is maintained until March 2025, while pubs, breweries and distilleries will benefit from a further freeze to alcohol duty until February 2025 – which will also save consumers money on their favourite tipple.

-New tax reliefs and investments will help establish the UK as a world leader in high-growth industries such as the creative sector, advanced manufacturing and life sciences, while 28,000 SMEs will be taken out of VAT registration altogether – encouraging them to invest and grow.

-‘Budget for Long Term Growth’ sticks to the plan by delivering lower taxes, better public services and more investment, while increasing size of economy by 0.2% in 2028-29 and meeting fiscal rules – taking the long-term decisions needed to build a brighter future.

More tax cuts for working people, more investment and a plan for better public services headlined Chancellor Jeremy Hunt’s ‘Budget for Long Term Growth’ today, Wednesday 6 March.

With the independent Office for Budget Responsibility (OBR) confirming inflation is set to fall to target a year earlier than previously expected, wages rising consistently and the economy outperforming European neighbours, the Chancellor said he would stick to the plan to improve living standards by rewarding work and growing the economy.

Building on the 2 percentage point cut to Employee National Insurance at Autumn Statement, Mr Hunt announced a second 2p cut from 10% to 8% from April. Taken together with the cut to Employee National Insurance at Autumn Statement, this slashes the main rate of Employee NICs by a third and means the average worker earning 35,400 pounds a year will be over 900 pounds better off this year.

The Chancellor also went further with tax cuts for the self-employed, having reduced Class 4 NICs from 9% to 8% and abolished the requirement to pay Class 2 NICs at Autumn Statement. Today he announced a further 2p cut to Class 4 NICs for the self-employed to 6%, meaning the average worker earning 28,000 pounds will be 650 pounds better off compared with last year.

Combined with changes at Autumn Statement, today’s announcements deliver personal tax cuts worth 20 billion pounds and reduce the effective personal tax rate for a median earner to its lowest level since 1975. The OBR says these reductions will lead to the equivalent of around 200,000 extra full-time workers by 2028/29, as people increase their working hours and move into work. This boost is why the Chancellor has prioritised NICs cuts in his ‘Budget for Long Term Growth’ and why he will continue to do so when fiscally responsible. He set out that his long-term ambition is to end the unfairness of double taxation of work.

Mr Hunt also announced that the High Income Child Benefit Charge will be assessed on a household basis by April 2026, with a consultation to come on achieving this.

To ensure working families benefit from increasing their earnings before this change is made, the threshold to start paying back Child Benefit will increase in April from 50,000 pounds to 60,000 pounds – a 20% increase which will take 170,000 families out of paying the charge this year – while Child Benefit will no longer need to be repaid in full until earnings exceed 80,000 pounds. This represents a 1,260 pounds boost on average for around half a million working families, rising to nearly 5,000 pounds for some families when combined with tax cuts since Autumn Statement. This will put an end to the current unfairness, where two parents earning 49,000 pounds a year receive the full Child Benefit while a household with a single earner on over 50,000 pounds does not. The OBR says the immediate changes to the HICBC will lead to an increase in hours worked equivalent to around 10,000 more people entering the workforce on a full-time basis.

The Chancellor also announced a landmark Public Sector Productivity Plan which marks the first step towards returning public sector productivity back to pre-pandemic levels and will ensure taxpayers’ money is spent as efficiently as possible. OBR analysis suggests that raising public sector productivity by just 5% would deliver up to 20 billion pounds of benefits a year.

Backed by 4.2 billion pounds in funding, the plan will allow public services to invest in new technologies like AI, replace outdated IT systems, free up frontline workers from time-consuming admin tasks and take action to reduce costs down the line. The NHS will receive 3.4 billion pounds as part of this over the forecast period - doubling investment in digital transformation, significantly reducing the 13 million hours lost by doctors every year because of old IT and delivering test results faster for 130,000 patients a year thanks to AI-fitted MRI scanners that help doctors read results more quickly and accurately. This investment, which comes alongside an extra 2.5 billion pounds cash injection for 2024/25 to support the NHS improve performance and reduce waiting times, means the NHS can commit to delivering 35 billion pounds in productivity savings over the next Parliament, while the 800 million pounds to boost productivity across other public services will deliver an extra 1.8 billion pounds in productivity benefits by 2029.

New tax breaks and investments will help to establish the UK as a world-leader in high-growth industries. The UK’s creative industries will be backed by over 1 billion pounds, including higher tax reliefs to lower the cost of producing visual effects in high-end TV and film, a 40% relief on gross business rates until 2034 will be introduced for eligible film studios, and a new tax credit for independent British films with a budget of less than 15 million pounds. Orchestras, museums, galleries and theatres will also benefit from a permanent 45% tax relief for touring productions and 40% relief for non-touring productions, while 26 million pounds will fund maintenance and repairs at the National Theatre.

A 360 million pounds package will support innovative R&D and manufacturing projects across the life sciences, automotive and aerospace sectors – with a further 45 million pounds funding to accelerate medical research into common diseases like cancer, dementia and epilepsy – while the Green Industries Growth Accelerator will be allocated an extra 120 million pounds to build supply chains for offshore wind and carbon capture and storage.

Opportunity will be spread across the country with hundreds of millions in funding to extend the Long Term Plans for Towns to 20 new places and a swathe of cultural projects, while local leaders will also be empowered to improve their communities through more devolved powers and a new North-East trailblazer devolution deal which comes with a funding package potentially worth over 100 million pounds to support the region’s growth ambitions.

The Chancellor also took steps to make the tax system simpler and fairer. The ‘non-dom’ tax regime will be abolished and replaced with a fairer system from April 2025 where new arrivals to the UK pay the same tax as everyone else after four years – raising 2.7 billion pounds a year by 2028/29. As the oil and gas sector’s windfall profits from higher prices are expected to last longer, the sunset clause on the Energy Profits Levy will be extended by a year to March 2029, raising 1.5 billion pounds while encouraging investment in the UK’s energy security by promising to legislate for its abolition should market prices fall to their historic norm sooner than expected.

Accompanying forecasts by the OBR confirm that the combined impact of decisions taken at Spring Budget and the preceding two fiscal events will increase the size of the economy by 0.7% and increase total hours worked by the equivalent of 300,000 full-time workers by 2028-29 - with the combined impact of government policy since Autumn Statement 2022 reducing the tax burden in the final year of the forecast by 0.6%. Today’s announcements will reduce inflation in 2024/25, bring the equivalent of over 100,000 people into the workforce by 2028-29 and permanently grow the economy by 0.2% - with borrowing falling in every year of the forecast.

SOURCE UK HM Treasury