British governing party announces tax cuts that it hopes can lift ailing election fortunes

LONDON (AP) — British Treasury chief Jeremy Hunt is seeking to bolster spirits within his Conservative Party ranks with a series of tax cuts that he hopes can turn the political dial ahead of a general election this year.

Even though the British economy has hit one definition of recession and public finances will remain stretched over coming years, Hunt used his annual budget statement on Wednesday to cut taxes.

He announced a reduction in national insurance — a tax that 27 million employees pay — by a further 2 percentage points, to 8 per cent.

He also froze taxes on alcohol and gas at the pump and lifted the amount of money individuals can earn before they have to pay back a child benefit they receive from the state.

With poll after poll showing the Conservatives losing heavily to the main opposition Labour Party in a general election, the government hopes putting more money in people's pockets during a cost-of-living crisis would boost the Conservative Party's dire ratings.

The election has to take place by January 2025 but could come as soon as May. Hunt's boss, Prime Minister Rishi Sunak, will decide when the election will take place as their party tries to retain control of government, which they have held since 2010.

Sunak has previously indicated that the election will most likely be in the second half of this year. However, Sunak has not ruled it out this spring, and Wednesday's tax-cutting budget could act as a launchpad for that.

Sunak and Hunt have restored a measure of economic stability after the short-lived premiership of Liz Truss, which foundered after a series of unfunded tax cuts roiled financial markets and sent borrowing costs surging.

But UK households are struggling under the worst cost-of-living crisis in decades. And economists warn that the tax burden will remain near record levels regardless of what the budget delivers as the government recoups the hundreds of billions of pounds that it spent during the pandemic and the energy price shock.

Adam Corlett, principal economist at the Resolution Foundation think tank, said there were "huge questions" about the need for tax cuts this year, given the outlook for public spending and the need to reduce our national debt.

"But, while this is going to be a tax-cutting election year, it is sandwiched between significant past and future tax rises, with the budget likely to only add to the number of tax increases coming in after the election," he said.

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