It’s the day of reckoning for Britain’s economy as it braces for the worst economic downturn since the 1930s.
The country’s biggest firms will be hit by a series of tax rises, with big retailers and high street retailers expected to face new taxes as they attempt to meet a target to reduce their tax bill by as much as 50%.
The Chancellor of the Exchequer, Philip Hammond, said the government was “looking at all the options” to avoid a “cliff edge” in the UK economy.
“This is about fairness and it is about being efficient, so that we can attract the best and brightest from around the world,” he said.
“It’s not about tax cuts for the rich, it’s about fair and efficient tax reform.”
It’s the first major legislative overhaul of the UK’s tax system since 2010, which saw an estimated 1.1 million people lose out on up to £50,000 per household over the past year.
The government said it would provide a “fair deal” to workers and businesses by lowering corporation tax and other tax rates, raising personal allowance tax thresholds, and introducing a two-year transition period for companies that switch from a corporate to a “general” tax structure.
But Labour has warned the changes will only be “a partial solution” to the UKs economic problems.
It’s time to end the Tory tax cut for the richest, says the party’s shadow chancellor, Stephen Kinnock.
“Today’s Budget should be the last step in an ambitious reform agenda that is designed to fix the broken system that has cost our economy billions,” he told the BBC.
“The Tories have failed Britain, the people of this country and the economy, and they must be held accountable.”
The UK’s economy is set to shrink by as many as 6.4 per cent this year, the first such drop since 2007.
The Chancellor’s plans come as a report released by the UK Government Office for Budget Responsibility said the economy could contract by 3.5 per cent in 2019-20 if the Government’s planned tax cut is not fully implemented.
In a briefing note, the Office for National Statistics (ONS) said the “possible outcome” of the tax cut had been “to add to UK GDP by 0.2 percentage points”.
“This would be equivalent to a contraction of 3.2 per cent and a fall in GDP by 4.1 per cent, or about a 0.6 per cent annualised rate,” it said.
In addition, the report said a series the UK would face a “very steep” growth slowdown of between 2.6 and 4 per cent from 2019-2020.
It said the fall in the value of the pound and the “challenges” facing the economy would lead to a decline in exports.
The ONS also forecast that in 2020, the UK will face a budget deficit of between £1.4bn and £1bn, which is more than the annual deficit of about £1 billion forecast for this year.