London, Thanasis Gavos

A series of tax cuts for workers and businesses included in his so-called “autumn statement”. Chancellor of the Exchequer of the United Kingdomi.e. the updated budget presented in the middle of the financial year (which in the UK starts in April).

Presenting the “110 new growth measures” to the plenary session of the House of Commons, Jeremy Hunt said that the British economy is back on the growth track, with positive fiscal indicators and an increase in wages.

Among the tax measures, which the minister described as “the biggest package of tax cuts since the 1980s”, the reduction of social security contributions for employees from 12% to 10% stands out, effective from January and not from April as usual. The measure saves over £450 a year for an employee on an average gross annual salary of £35,000.

Besides, a section (Class 2) of social security contributions for freelancers is completely abolished, “in recognition of their contribution during the pandemic”. The other leg of national insurance contributions (Class 4) for the self-employed is reduced from 9% to 8%. In total the two measures will save £350 a year in tax for this category of workers.

In addition, the measure setting a reduction of corporation tax by 25% on the amount a company invests in plant and machinery in the United Kingdom is made permanent. The measure, initially set to run for three years, was described by Mr Hunt as “the biggest business tax cut in modern British history”. He estimated that business investment would increase by roughly £3 billion a year as a result.

It also announced £4.3bn of tax relief for small businesses such as pubs and other catering businesses.

Mr Hunt added that four additional “investment zones” would be created in central England and Wrexham, Wales, areas with tax breaks to create jobs in new businesses.

In addition, the minimum wage will rise from April by almost 10% to £11.44 an hour. And the basic state pension will increase by 8.5%, i.e. by up to 900 pounds a year.

State welfare benefits will increase from next April by 6.7%, i.e. at the level of inflation last September. This translates to £470 a year on average for five and a half million households.

However, the framework of obligations of those who receive benefits while they are judged to be able to work is being tightened. If after 18 months of helping the unemployed find a job this does not happen, they will be obliged to take part in a work experience programme. If they refuse, then the benefits will be stopped. Mr Hunt commented that while Labor wants to flood the labor market with immigrants, the Government believes in the British workforce.

The rest of the measures include a £50m fund to increase apprenticeships in engineering and other professions critical to economic growth.

The Local Government will receive 450 million pounds for the construction of 2,400 new homes.

Investment of half a billion pounds over the next two years has also been announced to make Britain a global center for the development of Artificial Intelligence programmes.

Mr Hunt also presented new forecasts from the independent Office for Budget Responsibility (OBR), which stand out for inflation to fall further to 2.8% next year (from 4.6% currently, after peaking in 11.1% last October).

However, it should be noted that the OBR forecast in March indicated that inflation would fall to 0.9% this year. Ultimately, the fiscal target of containing inflation to 2% will be reached in 2025 according to the OBR.

The growth rate of the UK economy will be 0.6% this year, 0.7% next year and gradually increase to 2% in 2027. This belies earlier forecasts of a 1.4% contraction in GDP this year.

In terms of public debt, it will rise less than initially expected in the coming years, to almost 94% of GDP in 2028/29, which will be “the second lowest in the G7”.

Mr Hunt finally set a target of increasing productivity in the public sector by at least 0.5% a year.

Responding to Mr Hunt’s autumn statement, Labour’s shadow Chancellor of the Exchequer Rachel Reeves said the UK’s economic growth after 13 years of Tory rule “has hit a dead end”.

He added that despite today’s promises, citizens are in the worst financial position in 13 years, with wages having risen in real terms by only 3%.