Berliner Tageblatt - Britain set for tax-cutting budget before election

Prime Minister Rishi Sunak's party, which has been in power since 2010, is well behind the main opposition Labour party in opinion polls and looks likely to be dumped out of office.

But voter-friendly measures to win support are likely to be limited, analysts said, with state coffers constrained by stubbornly high inflation and the UK economy in recession.

Finance minister Jeremy Hunt's latest tax and spending plans will feature in an address to MPs in parliament at around 1230 GMT.

Sunak is hoping the measures will help the Tories close the gap with Keir Starmer's resurgent Labour Party ahead of the elections.

But with centre-left Labour having had a clear lead in polling since October 2022 and the gap currently at about 20 points, Sunak has a mountain to climb.

- 'We can cut tax' -

According to excerpts of his budget speech released to media outlets, Hunt was to say that "under Conservative governments since 2010, growth has been higher than every large European economy".

He will add: "Of course, interest rates remain high as we bring down inflation.

"But because of the progress we've made... we can now help families with permanent cuts in taxation."

British media reports said Hunt would announce a cut to national insurance (NI), a payrolls tax paid by employees and employers.

The move would mirror action taken by the government at its last budget in November.

"It may be that Jeremy Hunt has decided this is all he can afford to offer right now," said Sarah Coles, head of personal finance at Hargreaves Lansdown.

She added that about 27 million people would have an average of £450 ($573) more disposable income a year from the reported cut to NI.

"The question will be whether it's a enough of a blockbuster tax cut to move the dial on a general election," Coles said.

Economists have warned that tax cuts would impact investment in key public services such as the National Health Service and schools, which are already seeing shrinking budgets.

While UK inflation is easing, a current annual rate of four percent is still double the Bank of England's target.

The central bank has lifted interest rates to a 15-year peak of 5.25 percent to dampen inflation after it soared to the highest level in more than four decades in late 2022.

The cost-of-living crisis has worsened as commercial banks put up their own interest rates on loans, including mortgages.

- 'Change needed' -

UK media reports have suggested that the Tories could also use the budget to steal Labour's thunder, should it win the election, by scrapping a loophole enabling Britain's wealthiest residents to reduce their tax bill.

Labour has vowed to end the loophole that allows those with "non-dom" status, who live in Britain but whose permanent domicile is abroad, to avoid UK tax on income earned outside the country.

Speaking on the eve of the budget, Labour's finance spokesperson, Rachel Reeves, said Britain "needs change, not another failed budget or the risk of... more years of Conservative chaos".

"Only Labour has a long-term plan to deliver more jobs, more investment and to make working people better off," she added.

Reports also indicate that Hunt could introduce a new levy on vaping, which is already the subject of a major crackdown by Sunak's administration.

L.Janezki--BTB