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UK chancellor Jeremy Hunt claimed that Britain’s economy has “turned the corner”, as his pre-election Budget put a £10bn personal tax cut at the heart of the Conservatives’ bid to overturn Labour’s polling lead and hold on to power.

In his last spring Budget before the election expected this year, Hunt partly funded a 2p cut in national insurance contributions for 27mn workers through a range of tax-raising measures.

He targeted “non-doms”, the oil and gas sector, business-class air travel and vapes, stealing some Labour policies in the process.

In one of the few unexpected policies announced on Wednesday, he raised the threshold at which parents are charged for claiming child benefit to £60,000 from £50,000.

The chancellor also found cash for traditional crowd-pleasers, including a further £5bn freeze in fuel duty and a freeze to alcohol duty.

The Budget is an attempt to shift Britain’s political narrative away from the cost of living crisis to a more optimistic outlook of economic recovery and rising real incomes.

But behind the upbeat rhetoric was a sombre backdrop of tax levels continuing to rise to a postwar record high and continued pressure on Britain’s creaking public services, which face years of further spending restraint.

“Because we have turned the corner on inflation, we will soon turn the corner on growth,” Hunt said. He added that inflation — which hit 11.1 per cent in October 2022 — would fall below its 2 per cent target in “just a few months’ time, nearly a whole year earlier than previously forecast”.

The Office for Budget Responsibility, the UK’s fiscal affairs watchdog, now says the UK will expand 0.8 per cent this year, up from the 0.7 per cent it forecast in November. The OBR also predicts 1.9 per cent growth in 2025, up from its previous estimate of 1.4 per cent.

The Conservatives are banking on signs of improvement in the economy to turn around Labour’s persistent polling lead. But almost £10bn in personal taxation cuts in November have so far failed to overcome the Tories’ 20-point deficit compared to Labour.

Despite Hunt’s announcements, the OBR forecast showed the UK’s tax burden continuing to climb in coming years.

This is partly because of the impact of previously announced freezes to tax thresholds at a time of rising earnings and prices.

The OBR said tax as a share of GDP would rise gradually to 37.1 per cent in 2028-29, the highest level since 1948.

After the tax cuts and spending measures, the chancellor has been left with £8.9bn of “headroom” — one of the most slender for any chancellor for more than a decade, according to the OBR.

Underlying government debt will peak at 93.2 per cent of GDP in the second half of the decade, before edging lower in 2028-29 to 92.9 per cent, so meeting the key government’s fiscal rule.

In a continued squeeze on public expenditure to meet his fiscal targets, Hunt stuck with plans for a 1 per cent real-terms increase in day-to-day departmental spending from 2025-26. Capital spending is set to be frozen in cash terms.

Hunt argued that the government would deliver better services by lifting public sector productivity.

He said planned spending growth would stay the same in the next parliament, “but we are going to spend it better”.

He added that it “will be possible to live with more constrained spending growth without cutting services valued by the public.”

Via