Rishi Sunak is delivering his mini-budget – here are the main points, with political analysis
Rishi Sunak opens by highlighting the war in Ukraine and says Britain’s economic strength underpins freedom and liberty. The chancellor says he will respond to the conflict by building a stronger, more secure economy for the UK.
The chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 3.8% this year.
GDP will grow by 1.8% next year, 2.1% in 2024, 1.8% in 2025, and 1.7% in 2026.
In October, the OBR had forecast growth of 6% f0r 2022 as the UK economy recovers from the Covid pandemic.
The economy grew by 7.5% in 2021, after a fall of 9.4% in 2020 – the biggest decline for a century – during the first wave of the pandemic.
The chancellor says the OBR forecasts inflation will average 7.4% this year.
Fuel duty will be cut for only the second time in 20 years, by 5p a litre for a full 12 months.
Sunak says the fuel duty cut is worth £5bn and takes effect from 6pm on Wednesday.
The government will cut a 5% VAT rate for households installing solar panels, heat pumps, insulation to zero.
Sunak says he will double the government’s household support fund to £1bn.
Sunak says borrowing in the current financial year, 2021-22, will be 5.4 of GDP and will fall to 3.9% next year.
In its previous forecasts in October, the OBR had estimated borrowing would be 7.9% of GDP, or £183bn in cash terms, in 2022-23.
The chancellor says debt service costs will rise to £83bn in the next fiscal year, the highest level on record.
“We should be prepared for the economy and public finances to worsen potentially significantly,” Sunak says.
Sunak says the planned 1.25 percentage point rise in national insurance contributions must remain, as a “dedicated funding source” for health and social care.
However, he announces he will increase the threshold by £3,000 this year, up from a planned rise of £300. This equalises national insurance contributions threshold with the personal allowance of £12,570.
He calls it a £6bn personal tax cut for 30m people, and the largest single personal tax income in a decade.
Sunak announces reforms to research and development tax credits, saying the generosity of reliefs for business investment will be increased to boost UK productivity.
The chancellor says “something is not working” with UK investment in productivity.
He says the government will cut tax rates on business investment at the autumn budget.
The chancellor says he will 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.
Sunak says the basic rate of income tax will be cut from 20% to 19% in 2024.
He says 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 says.
The chancellor says it will be the first cut in income tax for 16 years.
