Final shot bar: UK finance minister to promise tax cuts.

TLDR:

UK Finance Minister Jeremy Hunt is expected to announce tax cuts before the upcoming general election. Economists predict the government’s fiscal headroom has grown, allowing for modest tax cuts. Hunt faces the challenge of balancing fragile public finances and a stagnant economy.

Main Article:

Economists anticipate UK Finance Minister Jeremy Hunt will use a fiscal windfall to implement tax cuts at the Spring Budget before the general election. With the Conservative party trailing in polls, Hunt is under pressure to offer a sweetener to voters. Despite the fragile public finances and a modest technical recession, market expectations for interest rates have fallen, providing some relief.

The Treasury announced plans to enhance public sector productivity and provide funding for research and development and manufacturing projects in various sectors. Deutsche Bank estimates the government’s fiscal headroom has increased, pointing towards the likelihood of tax cuts. Supply side support is favored over boosting demand, with potential tax cuts to national insurance contributions and child benefits.

Hunt’s Autumn Statement highlighted a National Insurance cut, but existing freezes on income tax thresholds may offset its benefits. BNP Paribas economists project a package of tax cuts aimed at labor supply stimulation. The government is expected to use the windfall for tax cuts and possibly postpone the fuel duty rise.