Opening speech
Rishi Sunak kicked off with an emphasis on the war in Ukraine, stating that Britain's economic power supports freedom and liberty. The Chancellor said he would respond to the conflict by building a stronger and safer economy for Britain. "The steps we have taken to sanction the Putin administration are not free for our home. The Ukraine invasion poses risks not only to our recovery, but to countries around the world."
Growth
- The Chancellor said estimates by the Department of Budget and Responsibility showed that the economy would grow 3.8% this year.
- GDP will grow 1.8% next year, 2.1% in 2024, 1.8% in 2025 and 1.7% in 2026.
- In October, OBR predicted 6% growth in 2022 as the UK economy recovered from Covid's pandemic.
- The economy grew 7.5% in 2021 after a 9.4% contraction in 2020 (the largest contraction in the first century) during the first wave of the pandemic.
Cost of living
- The Minister of Finance said the OBR forecasts that this year's average inflation rate will be 7.4%.
- Fuel tax will be reduced by 5p per liter for 12 months for the first time in 20 years.
- The fuel tax cut is worth £ 5 billion and will take effect Wednesday at 6 pm, Sunak said.
- The government will reduce the VAT rate of 5% for households that install solar panels, heat pumps, or insulation to zero.
- Sunak said he would double the government's budget support fund to £ 1 billion.
Borrowing
- According to Sunak, borrowing in fiscal year 2021-22 was 5.4% of GDP and will drop to 3.9% next year.
- In cash, OBR estimates the budget deficit (the gap between spending and revenue) to be £ 127.8 bn in 2021-22 and £ 99.1 bn next year.
- Earlier forecasts from October predicted that borrowing would reach 7.9% of GDP or 183 billion LP in 2022.
- Public sector net debt should reach 95.6% of GDP in 2021-22 and then gradually decline to 83.1% of GDP by 2026-27.
"We need to be prepared for the potentially significant economic and financial deterioration," Sunak said.
National insurance
- Sunak said the planned increase in social security contributions of 1.25 percentage points must be maintained as a "dedicated source of funding" for health and social security.
- However, he announced that he would raise the threshold by £ 3,000 this year from the planned £ 300 increase. This corresponds to the social security contribution threshold of £ 12,570, which is a personal income tax deduction.
- He calls it a £ 6 billion personal tax cut for 30 million people and the largest single personal tax cut in 10 years.
Business investment
- Sunak, which announced a change in R&D tax credits, said it would increase the generosity of business investment credits to increase productivity in the UK.
- "Something is wrong" with the UK's investment in productivity, the Chancellor said. He said the government would cut tax rates on business investment at the autumn budget.
- The chancellor said he would increase the employment allowance for small businesses to £5,000 – a tax cut worth up to £1,000 for half a million small firms starting in two weeks` time.
Income tax
- Sunak said the basic rate of income tax would be cut from 20% to 19% in 2024.
- He said it would not be responsible to make such a tax cut right now, given the uncertainty in the economy.
- “Tax cuts must be paid for, they must be prioritised and they must fit the economic circumstances of the time,” he said.
- The chancellor said it would be the first cut in income tax for 16 years.
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