Sunak kicked off the statement by praising the courage of Ukrainian citizens as they continue to resist the Russian invasion, saying “the sorrow we feel for their suffering and the admiration for their bravery is matched only the gratitude we feel for the security in which we dwell”.
“What Putin sees as division, we see as debate. What he sees as chaos, we see as creativity,” he continued.
He argued that it is the “strength of our economy” that allows the UK to maintain its security.
The Chancellor’s first key announcement, trailed through the media over the past few days, was a fuel tax cut of 5p a litre. Sunak said the cut will “be worth over £5billion and will take effect from 6pm”. The cup will last until March 2023.
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The Chancellor admitted his actions were not “gratuitous”.
He pointed to the Russian invasion of Ukraine as a risk to Britain’s economic recovery from the pandemic, admitting the Office for Budget Responsibility forecast growth of 3.8% this year.
He said the government was able to reduce VAT on energy efficiency measures and it would be reduced to zero on energy saving technologies such as solar panels. The reduction, which will last 5 years, will not extend to Northern Ireland due to the ongoing protocol, but he said NI would receive equal funding.
The Chancellor said the reduction meant the average family could save £1,000 on installing solar panels and up to £300 a year on their overall energy bills.
In another key announcement, Sunak promised to cut the basic income tax rate from 20p in the pound to 19p in the pound in 2024 – the year the next general election is currently due.
Sunak pointed out that income tax had only been cut twice in the past two decades, which he said was proof that it was “hard to do”. He argued that “Covid and war have made this more difficult”. He went so far as to say it would have been “irresponsible” to cut taxes this year, but he “refused to let ambition wane”.
He went on to explain that the Household Support Fund would receive additional funding of £500million, which local authorities will be responsible for managing.
Sunak also said that 70% of workers will benefit from an “effective tax reduction” recommended by the Institute for Fiscal Studies (IFS), as he will increase the National Insurance (NI) contribution threshold by 3 £000.
‘From this July people will be able to earn £12,570 a year without paying a penny of income tax or national insurance,’ he said.
Labour’s shadow Chancellor Rachel Reeves then responded to her counterpart’s plans, describing his demands for tax cuts as “increasingly incredible”.
She accused him of being inspired by the classic fantasy novel Alice in Wonderland, “or Alice in the land of the sun”, she quipped.
She argued that Sunak offered people £200 but then demanded it back. “He says he believes in lower taxes, but taxes go up,” she said.
“Alice would ask, does lower taxes mean higher taxes?” Comparing Sunak’s approach to the novel, she satirized his attitude: “When I use the word, it means exactly what what do I choose that it means?”. She even claimed that the Chancellor “lived in a different reality”.
She also joked that the Chancellor was “Ted Heath with an Instagram account”.
Reeves finished to cheers from the opposition benches, saying: ‘The Chancellor has failed to understand the scale of the challenge we face. And again, he is making the wrong choices for our country.
Torsten Bell, chief executive of the progressive think tank Resolution Foundation, presented the NI changes as a “tax cut for the middle and top of the income distribution”, explaining that “only £1 out of £3 of the advantage goes to the bottom half. ”
IFS Director Paul Johnson also harshly criticized the Chancellor’s announcement on taxation, saying via Twitter: “Oh for God’s sake. What is the possible justification for reducing the income tax rate while increasing the NI rate? Leads to an additional gap between the taxation of capital income and labor income. Again, this benefits retirees and those who live off rent at the expense of workers.”
Christopher Snowdon, head of lifestyle economics at the free market think tank, the Institute of Economic Affairs, also issued a rebuke of today’s statement saying that: “The Chancellor has decided to mitigate the impact of rising prices rather than trying to tackle inflation.
“There are no easy solutions and Sunak’s admission that the UK will pay £83billion to service the national debt in 2022/23 shows there are no easy solutions. cheap money.
“Britain has high inflation, high debt and – still – high taxes. The challenge now is to prevent high unemployment and grow the economy,” he continued.