Jeremy Hunt has indicated that the potential for tax cuts in the upcoming March Budget may be more limited compared to the previous autumn.
In an interview with the BBC, the chancellor expressed his desire to reduce the tax burden in order to stimulate economic growth.
However, he emphasised the importance of approaching this matter in a responsible manner.
During the previous year’s Autumn Statement, which outlines the government’s tax and spending plans, Mr. Hunt revealed a reduction in the main rate of National Insurance from 12% to 10%.
In January, Mr Hunt made several suggestions that he intended to reduce taxes in the upcoming spring Budget.
During his speech at the annual World Economic Forum in Davos, Switzerland, he emphasised the positive correlation between lower taxes and the economic growth of countries.
According to a report from the Times newspaper, it was mentioned in a recent cabinet meeting that the economy has some significant structural weaknesses, such as low productivity. As a result, there may be limited room for tax cuts in the upcoming Budget on 6 March.
In response to the reports, Mr. Hunt mentioned during an interview with the BBC’s Political Thinking podcast that he is currently waiting for the “final numbers” from the independent Office for Budget Responsibility (OBR).
The OBR provides economic forecasts for the government prior to budgets, offering insights into potential opportunities for tax cuts or spending increases.
“Based on Mr. Hunt’s statement, it appears that the scope for cutting taxes in the upcoming spring Budget may not be as extensive as it was in the Autumn Statement.”
“It is important for me to clarify the magnitude of my actions, as it is crucial for people to understand that when a Conservative government reduces taxes, we will do so with responsibility and prudence.”
He emphasised that their goal is to reduce the tax burden, while also acknowledging the need for clarity in their direction.
When questioned about potential disappointment among Conservative MPs who have been advocating for significant tax cuts before the upcoming general election, Mr Hunt responded by highlighting the conservative approach to fiscal responsibility. He emphasised that it is not in line with conservative principles to reduce taxes by increasing borrowing, as this would burden future generations with higher taxes.
There have been indications for several weeks that tax cuts may be unlikely, despite the overall tax burden remaining at a record high.
Last week, the Institute for Fiscal Studies (IFS) highlighted the need for the next government to secure an additional £20bn in order to sustain current levels of spending on NHS, defence, childcare, and international aid.
The IFS expressed a pessimistic outlook for the next government due to sluggish economic growth and a pressing cost-of-living crisis.
On Tuesday, the International Monetary Fund (IMF) issued a warning to the UK, urging caution regarding additional tax cuts. The IMF emphasised the importance of maintaining public services and investment, which would require higher spending than what is currently outlined in the government’s plans.
According to Mr. Hunt, he shares the same view as the IMF regarding the ineffectiveness of untargeted tax cuts that are merely intended to please the public.
“If they are strategic and smart, tax cuts can play a crucial role in the overall strategy to boost the economy,” he emphasised.
The chancellor highlighted his decision to reduce National Insurance and taxes for businesses in the Autumn Statement, emphasising that this would incentivize employment and stimulate investment.
During the discussion, Mr Hunt was questioned about remarks made by OBR boss Richard Hughes regarding the government’s projected spending plans for individual departments. Hughes referred to these plans as “a work of fiction” that the government hasn’t even bothered to document.
“Those statements are incorrect and should not have been uttered,” expressed the chancellor.
“The government determines spending plans and conducts spending reviews.” Our spending plans will not be published until the completion of the upcoming spending review in April 2025. No government has ever done so.