Presenting his ‘Budget for Long Term Growth’ yesterday, British finance minister Jeremy Hunt cut the rate of social security contributions by 2 percentage points for the second time in over three months, and announced tax cuts for the self-employed and a Public Sector Productivity Plan.

Building on the 2 percentage point cut to Employee National Insurance at the Autumn Statement, Hunt announced a second such cut from 10 per cent to 8 per cent from April this year.

Today’s announcements deliver personal tax cuts worth £20 billion (~$25.48 billion) and reduce the effective personal tax rate for a median earner to its lowest level since 1975, according to an official release. The Office of Budget Responsibility (OBR) says these reductions will lead to the equivalent of around 200,000 extra full-time workers by fiscal 2028-29, as people increase their working hours and move into work.

The Public Sector Productivity Plan marks the first step towards returning public sector productivity back to pre-pandemic levels and will ensure taxpayers’ money is spent as efficiently as possible. OBR analysis suggests that raising public sector productivity by just 5 per cent would deliver up to £20 billion (~$25.47 billion) of benefits a year.

Backed by £4.2 billion (~$5.3 billion) in funding, the plan will allow public services to invest in new technologies like artificial intelligence, replace outdated information technology systems, free up frontline workers from time-consuming admin tasks and take action to reduce costs down the line, the release noted.

The Green Industries Growth Accelerator will be allocated an extra £120 million (~$152.9 million) to build supply chains for offshore wind and carbon capture and storage.  

Small and medium enterprises (SMEs) will be supported to invest and grow through a £200 million (~$254.77 million) extension of the Growth Guarantee Fund, helping 11,000 small businesses to access the finance they need, and an increase in the value-added tax (VAT) registration threshold from £85,000 (~$0.108 million) to £90,000 (~$1.146 million), which will take around 28,000 small businesses out of paying VAT altogether.

Hunt also took steps to make the tax system simpler and fairer.

Fibre2Fashion News Desk (DS)

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