Despite today’s GDP figures showing that the UK economy has fallen shrank in the second half of 2023, forecasts suggest that things are looking up in 2024 and Hunt needs to take full advantage without delay.
Leading experts told the Daily Express the Chancellor may have enough headroom to knock £20billion off the collective tax bill and should take further measures to boost the country. Official figures released yesterday revealed that inflation defied predictions of a rise in January.
It unexpectedly held steady at four percent – below the 4.2 percent forecast by some financial commentators.
Food costs dropped for the first time in two-and-a-half years with the prices of bread, cereals, cream crackers and chocolate biscuits all coming in lower.
Meanwhile Andrew Bailey, the Governor of the Bank of England, also told peers yesterday the UK’s economy is beginning to improve.
Crucial gross domestic product figures due to be released today were expected to show that the country tipped into a technical recession at the end of last year.
But Mr Bailey assured the House of Lords economic affairs committee yesterday: “Going forward – and I think this is in some ways more significant – we are now seeing some signs of the beginning of a pick-up in some of the surveys, for instance … we’ve got a modest pick-up this year which continues thereafter.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics researchers, forecast a 0.1 percent decline in the fourth quarter.
But he added prospects already looked brighter.
Mr Tombs continued: “The reality is the economy is now on the up.
“Developments since our last forecast review at the start of January have left us more confident in our above-consensus forecast that quarter-to-quarter growth in GDP will pick up to an average rate of 0.3 percent this year.”
Mr Hunt commented on the standstill inflation figure that was unveiled yesterday: “Inflation never falls in a perfect straight line, but the plan is working.
“We have made huge progress in bringing inflation down from 11 percent, and the Bank of England forecast that it will fall to around 2 percent in a matter of months.”
As reports came in that the economy was improving, the Daily Express sought the views of a panel of five economic experts.
They urged the Chancellor to cut taxes, to reduce government waste and to increase productivity in the public sector.
The group said that Mr Hunt should especially target taxation that inhibits growth in his spring Budget on March 6 This includes income tax and stamp duty as well as inheritance tax and the tourist tax.
Professor Patrick Minford, a internationally respected economist at Cardiff Business School, declared: “Mr Hunt has shown that he understands the importance of lighter regulations.
“Now he must show he also understands the need for lower tax rates.” The experts said that cutting taxes would put more money into people’s pockets.
That cash would then work its way back into the economy, delivering some much-needed growth.
READ MORE: Britain enters recession as GDP falls for second consecutive quarter
Mr Hunt also had the opportunity to give businesses a boost, by cutting corporation tax from today’s rate of 25p back down to 19p where it had been previously. That move would help to support the millions of small and medium-sized businesses that are struggling to survive and grow.
Douglas McWilliams, the deputy chairman of Centre for Economics and Business Research consultancy, also urged the Chancellor to attack the “cancer of inefficiency” that he said affects public services.
Here’s how different tax cuts could stimulate the economy.
Cutting income tax rates: Proponents argue putting more money in workers’ pockets can increase consumer spending power, incentivise people to work and lead to higher productivity.
Scrapping stamp duty on houses under £1million: This could reinvigorate the housing market by encouraging people to downsize or move to larger homes.
Scrapping inheritance tax: The unpopular tax brings in just £7billion each year, less than one percent of government revenues. Critics say the levy reduces savings, meaning abolishing it could increase investment.
Scrapping “tourist tax”: The Office for Budget Responsibility is to review the 2020 decision to scrap tax-free shopping for tourists, which leisure firms and retailers say deters visitors and has lost the UK billions in sales.
Cutting corporation tax: Hunt should reverse the rise in corporation tax from 25 percent to make it a more internationally competitive 19 percent.
Supporters argue low rates of corporation tax provide incentives for firms to invest in the UK. They point to the Republic of Ireland which has had a corporation tax rate of 12.5 percent since 2003 and has become a magnet for overseas investment.
