UK's Sunak Cuts Taxes Amid Cost-of-living Squeeze

Britain’s finance minister, Rishi Sunak, cut taxes for workers and reduced a duty on fuel on Wednesday as he sought to soften a severe cost-of-living squeeze against the backdrop of fast-rising inflation and slowing economic growth.

Announcing a half-yearly budget update in parliament, Sunak said he was increasing the threshold at which workers start to pay national insurance, or social security, contributions by 3,000 pounds this year.

"That's a 6 billion pound personal tax cut for 30 million people across the United Kingdom," he said, adding that the cut was equivalent to more than 330 pounds a year per worker, making it the largest single personal tax cut in a decade.

Sunak stuck to his plan to increase national insurance contributions from next month, however – part of his plan to fund more spending on health and social care after the Covid-19 pandemic.

In his Spring Statement, he announced a reduction of one pence in the pound in the basic rate of income tax in 2024. A cut in fuel duty of 5 pence per litre would start immediately and last until March next year.

Sunak and Prime Minister Boris Johnson have been under pressure, including from lawmakers within their ruling Conservative Party, to do more to help households as they struggle with the rising cost of living.

Sunak announced new forecasts showing the British economy will grow more slowly this year than previously predicted, hit by uncertainty caused by Russia's military campaign in Ukraine, and that inflation will be much higher.

Forecasts drawn up by the UK’s Office for Budget Responsibility showed the economy was likely to grow by 3.8 percent in 2022, a sharp slowdown from a forecast of 6.0 percent made in October.

Inflation, as measured by the consumer price index, is now seen at 7.4 percent in 2022, compared with October's forecast of 4.0 percent. (Reuters)