Jeremy Hunt is announcing his financial update – here are the main points, with political analysis
Jeremy Hunt says the government has taken difficult decisions to put the economy back on track and halve inflation, but “the work is not done”. The chancellor says his priorities are to avoid big government spending and high tax, and instead cut taxes and “reward hard work” with 110 “growth measures” for business.
The chancellor says forecasts from the Office for Budget Responsibility show the economy will grow by 0.6% this year and 0.7% next.
It is now 1.8% larger than it was before the Covid-19 pandemic, according to the official figures, he says.
Inflation is expected to fall to 2.8% by the end of 2024 according to the spending watchdog, down from 11.1% last year when Hunt and Sunak took office.
GDP will then grow 1.4% in 2025, and 1.9% in 2026 and 2% in 2027 and 1.7% in 2028.
In March, the OBR had forecast the economy would shrink by 0.2% in 2023, before growing by 1.8% in 2024, 2.5 % in 2025, 2.1% in 2026 and 1.9% in 2027.
Inflation is expected to fall to 2.8% by the end of 2024 according to the spending watchdog, down from 11.1% last year when Hunt and Rishi Sunak took office.
As pre-announced, the national living wage will increase by more than a pound an hour from April to £11.44. It will also be extended to 21-year-olds.
Benefits will be increased by 6.7%, and there will be tougher requirements for those who claim them to look for work.
The state pension will be increased by 8.5%.
Hunt says he will increase the local housing allowance, which has been frozen since 2020, in a measure worth £800 for some households next year.
Hunt says headline debt is to be worth 94% of GDP by the end of the forecast period, lower than forecast by the OBR in March.
In cash terms, the OBR estimates the budget deficit – the gap between spending and income – is 4.5% of GDP in 2023-24.
In its previous forecasts in March, the OBR had estimated borrowing would be 5.1% of GDP or £132bn in cash terms, in 2023-24.
Hunt says he wants to reform taxes paid by self-employed people, and will abolish their “class 2” national insurance contributions, which count towards their state pension entitlements. This will cut taxes for 2 million people, he says. “Class 4” contributions will be cut by one percentage point. Together these will be worth £350 a year.
There will be a business rates discount for hospitality retail and leisure with £4.3bn.
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