Houthi Rebels' Attacks on Shipping Could Impact Chancellor's Plans
Terror attacks on ships in the Red Sea, carried out by Iran-backed Houthi rebels, may jeopardize Chancellor Jeremy Hunt's plans for significant tax cuts in the upcoming UK Budget, according to government insiders. Hunt has cautioned that he does not have the same flexibility to implement giveaways as he did during the Autumn Statement. Instead, he is expected to focus on targeted tax reductions, particularly in the area of work, such as National Insurance Contributions.
Impact on Shipping and Inflation
The ongoing attacks on Western commercial shipping in the Red Sea have caused a surge in the cost of container vessels transporting goods from Asia to Europe. This increase in shipping costs could further drive up inflation. Many container vessels have been forced to take the longer and more expensive route around Africa's Southern Cape, rather than passing through the Suez Canal, to ensure safer passage.
A government insider stated, "Jeremy is not just managing expectations with his comments. Just look at what is going on in the Suez Canal. There is a risk that is inflationary."
Rising Shipping Rates and Calls for Alcohol Duty Cuts
Container shipping rates have skyrocketed since the Houthi attacks began in support of Hamas in Gaza. In January alone, the cost of a 20ft container on the Shanghai to Europe route rose by 8.1% to £2,375.
In addition, Chancellor Hunt is facing pressure to reduce alcohol duty on spirits in the upcoming Spring Budget. Currently, 80% of the cost of a bottle of spirits is made up of taxes, making the UK the highest taxed country for spirits among the G7 nations. Producers of Scotch and gin argue that the current alcohol duty rate is "unsustainable" and is contributing to the closure of pubs across the country. They have written to the Chancellor, urging him to consider a duty cut to alleviate the burden on the hospitality sector.
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