Rishi Sunak's last chance: Conservatives demand tax cuts before the election

The head of the United Kingdom Economy, Jeremy Hunt, who once unsuccessfully aspired to occupy number 10 Downing Street, has become the lifeline for prime ministers in the last two years.

His incorporation into the Liz Truss Government managed to straighten out the accounts after a brief and turbulent mandate that sank the country's international credibility.

The current Prime Minister, Rishi Sunak, kept him in the job.

This Wednesday, Hunt presents his second budget, the spring budget, and all eyes in the party will be attentive.

If his own rigor or the forecast figures prevent him from announcing a tax cut, the hardline conservative wing will mercilessly attack Sunak and his minister.

Only a tax cut could raise the expectations of some

Tories

who face a more than certain defeat in the general elections scheduled for the end of the year.

The prime minister and his

chancellor

(as the head of the Economy is known in British political jargon) have held several meetings in recent weeks to prepare a key budget.

Sunak, from an economic background, took over from Hunt during Boris Johnson's premiership.

He is a meticulous man, attached to figures and details and more of a technocrat than a politician.

Both have debated these days between presenting a prudent plan that does not jeopardize the deficit or debt objectives, or giving joy to their voters with a reduction in income tax.

In the autumn budget last October, Hunt limited himself to reducing social security contributions (

national insurance

, according to the British fiscal term).

It was an announcement well received by businessmen, and with a better direct impact on the economy and job creation, but it does not have the political effectiveness and impact of the announcement of a reduction in the basic income rate, which voters understand. and appreciate immediately.

The newspaper

The Times

announced this Tuesday, however, that the Minister of Economy will once again opt for a reduction of another two percentage points in social security contributions – much less expensive – to which he will add discounts on the fuel tax. .

“The 2019 Conservative voters [those who backed Johnson and his Brexit] who suffer from greater economic insecurity have completely distanced themselves from the party.

Only 45% of Tory

voters ,

among those

who claim that they can barely afford their daily lives or make ends meet, would give their vote again to Sunak today,” says Luke Tryl, director of the sociological company

More in Common.

His latest survey for the publication

PoliticsHome,

with a sample of 5,000 respondents, presents a gloomy outlook and a negative mood among citizens.

33% of those surveyed admit that they do not have extra money to indulge themselves, and 17% directly indicate that they have problems making ends meet.

The UK economy entered a technical recession in the second half of 2023. The word itself casts a pall of pessimism on voters, but growth forecasts for the current year and 2025 from both the Bank of England and the Bureau of Budget Responsibility are almost flat.

They present almost dead activity.

Three objectives

Hunt desperately needs to meet a triple objective: to ensure that some growth can be felt in the coming months, to maintain the fiscal rigor that the markets demand and to give the conservative deputies who are running for re-election a joy in the form of lower taxes. that allows them to harbor hope of a comeback.

Today all the polls give Labor an advantage of more than 20 points if the polls were called.

The rules that the British Government imposed on itself more than a decade ago, when David Cameron and his Chancellor of the Exchequer, George Osborne, used the recipe for austerity to overcome the financial crisis, force the budget forecasts to include a decrease in debt in the last year of a five-year cycle.

That is, Hunt should present calculations indicating that in March 2025, the British debt would already be lower than in March 2024.

Such a long-term estimate by a Government that probably has its days numbered harbors something of fantasy and fiction, as many experts point out, and lends itself to accounting tricks.

Hunt could perfectly well bet on a tax cut, if it were not for the fact that the debacle of Truss's mandate has set the bar very high.

“One of the great tragedies of that mini-budget presented by Truss and her Minister of Economy, Kwasi Kwarteng [with a tax reduction of more than 50,000 million euros], is that confidence in the Government's accounts is almost non-existent.

That's why Hunt feels he must be very rigid in his interpretation of fiscal rules.

But this rigidity runs the risk of generating new mistrust,” warns Paul Johnson, director of the Institute for Fiscal Studies.

Some media, such as

The Financial Times

, have pointed out that Hunt could surprise with an increase in the so-called tax for non-residents, a formula that for years has allowed billionaires with temporary headquarters in the United Kingdom to pay a ridiculous fixed amount for their fortunes.

Sunak's wife, Akshata Murty, daughter of the Indian potentate Narayana Murthy, founder of Infosys, took advantage of this formula until media pressure forced her to start paying income tax.

Such a decision would allow Hunt to scrape a few billion to finance other tax cuts, and above all it would rob the Labor opposition of its star proposal.

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