The UK economy is forecast to grow by 0.8% this year after entering a recession in the second half of 2023, finance minister Jeremy Hunt said today in possibly his last fiscal statement before an election expected this year.
The new figure for growth was a touch stronger than a forecast for an expansion of 0.7% in the previous outlook for 2024, published by the Office for Budget Responsibility (OBR) in November.
The OBR now projects economic output to expand by 1.9% in 2025 and by 2% in 2026, Hunt said in his budget speech.
Those forecasts compared with the OBR's previous expectations for growth of 1.4% and 2% in 2025 and 2026.
Hunt and Prime Minister Rishi Sunak have promised voters they will get the economy growing more quickly as they try to overhaul the opposition Labour Party's big opinion poll lead.
Jeremy Hunt said today he would cut the rate of social security contributions paid by 27 millions workers for a second time in under four months.
Hunt said the government would reduce National Insurance Contributions by 2 percentage points for employees and the self-employed, to help encourage people back to work and deliver a high wage, high skill economy.
The latest cut, effective from April, would be worth about £450 a year for an employee and £350 for someone self-employed, he said.
"We need a simpler, fairer tax system that makes work pay," Hunt told parliament in his annual budget speech.
In November, he announced a 2 percentage-point cut to the main rate for employees and a 1 percentage-point cut for self-employed workers.
Taken together, Hunt said the tax cuts were worth £900 to the average worker.
The new cuts mean employees earning more than about £12,570 a year will pay 8% in NICs on their earnings up to about £50,270, while self-employed workers pay 6%.
Jeremy Hunt also said today he would abolish a so-called "non-dom" status that let residents avoid tax on overseas income, raising £2.7 billion a year by adopting an opposition Labour Party policy.
Non-domiciled status had been available to people who live in Britain but do not consider it their permanent home, and allowed them to opt to pay UK tax only on income earned in, or transferred to, Britain.
Hunt said he would replace it with a system which is "both fairer and remains competitive with other countries," adopting similar language to Labour leader Keir Starmer, whose pledge to scrap it was a flagship policy ahead of an election this year.
"The government will abolish the current tax system for non-doms," Hunt said in his annual budget speech, adding that new arrivals would still not be required to pay tax on foreign income and gains for their first four years of UK residency.
"After four years, those who continue to live in the UK will pay the same tax as other UK residents," he added.
Sunak and Hunt raised taxes sharply in 2022 to quell mayhem in the bond market sparked by shortlived former Prime Minister Liz Truss's sweeping tax cut plans.
With Britain's debt burden the heaviest since the 1960s, Hunt has played down calls from within the Conservative Party for major giveaways.
Mindful of how Truss sent markets into a tailspin only 18 months ago, he has promised to stick to his plans for less new borrowing.
But he said in his speech that the fall in inflation from a peak of more than 11% means "we can now help families not just with temporary cost of living support but with permanent cuts in taxation".
Hunt also said the OBR now expected Britain's inflation rate to fall below 2% in the coming months.
