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Teaching activity

In the News Teaching Activity – can the Chancellor cut taxes in the upcoming budget? (Mar 2024)

Elizabeth Veal

4th March 2024

The 2024 Budget is on Wednesday 6th March and there is much talk about whether the Chancellor may find some tax cuts before the General Election. This BBC article looks at some of his possible choices and what the costs might be for public finances.

It is a tough job for the Chancellor to find some ‘fiscal headroom’ for tax cuts in Budget 2024. The economy was in recession the second half of 2023, the tax burden has been rising, National Debt as a % of GDP is stubbornly high and a recent YouGov poll showed that only one in four prefer tax cuts to improving funding for public services. However, expectations are that Jeremy Hunt is likely to find some elusive tax giveaways. Cutting the main rate of income tax by 1p would cost £7bn; a further 1% cut in National Insurance, which would cost £4.5bn per year; scrapping the increase in fuel duty would cost £2bn in 2024-2025; abolishing IHT altogether estimated to cost £7bn. A possible tax on vaping is unlikely to fund these cuts and with economic growth so insipid, the economy may not generate extra tax revenue any time soon. Good economists will be keen to see what really happens in the Budget this week!

Budget 2024: When is it and what will it mean for my money? - BBC News

1 What is the Budget?

2 What is ‘fiscal headroom’ and why could it affect the choices the Chancellor is able to make in the 2024 Budget?

3 Discuss the factors to consider when deciding whether it would be better for the UK economy to cut taxes or increase government spending to promote economic growth.

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Elizabeth Veal

Liz has taught Economics for over 25 years, including several years as Head of Economics at leading schools.

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