Chancellor of the Exchequer Jeremy Hunt is expected to disappoint investors and his critics in the UK ruling party Friday by rejecting calls for tax cuts, even as he argues that Brexit will drive economic growth.
Hunt will use a speech at Bloomberg’s European headquarters in London to suggest he can use freedoms secured by leaving the European Union to tackle a crisis in economic inactivity and improve sluggish growth figures.
The Office for Budget Responsibility sees the UK economy in recession for 2023, although it is forecast to grow again in the final quarter before expanding more rapidly across 2024. The UK is the only G-7 economy with GDP below pre-Covid levels.
Opposing what he called a narrative of “declinism” about Britain, Hunt will argue that Brexit can be a “catalyst” for prosperity, insisting: “Our plan for growth is a plan built on freedoms which Brexit provides.”
During the Brexit referendum back in 2016, Hunt said Britain should remain in the EU, and more recently he has admitted that leaving the bloc threw up trade barriers. However, his language on Friday will be targeted at the ruling Conservative Party’s Brexiteer right and looks to counter claims from researchers including the Center for European Reform, which has said that Brexit left the UK economy 5.5% smaller than it would’ve been.
However, the chancellor will caution against suggestions from some Tory MPs that he needs to implement tax cuts in his Spring Budget to boost growth. Hunt will say in his speech that the best tax cut available is a cut in inflation, a government official said.
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Instead, the March 15 Budget will focus on poor productivity, which Hunt will pledge to tackle “head on.”
The chancellor will vow to back “world-beating enterprises to make Britain the world’s next Silicon Valley.” Bloomberg reported this week that the UK is drawing up plans to provide direct taxpayer funding to support British semiconductor companies as part of a strategy for the sector.
He will also confirm that plans to repeal EU-era Solvency II rules to allow insurers to invest in UK infrastructure will be implemented in the coming months, according to an emailed statement from his office. The chancellor will suggest this could result in £100 billion ($162.63 billion) of extra private investment in areas such as clean energy, citing figures from the Association of British Insurers.