by Chancellor Jeremy Hunt has the chance to soften tax cuts after admitting there is less room in the spring budget than he had previously hoped.
Mr Hunt has confirmed he has warned the Cabinet there is less scope for tax cuts on March 6, despite clamor within Tory ranks for cuts to try to woo voters ahead of the general election. about to
“It does not appear to me that we will have the same scope to cut taxes in the spring budget as we had in the autumn statement,” said Mr Hunt. BBC Political Thinking podcast.
“And so I need to set people’s expectations about the scale of what I’m doing because people need to know that when a Conservative government cuts taxes we will do so in a responsible and sensible way. But we also want to be clear that the direction of travel we want to go in is to reduce the tax burden.”
The comments come after warnings from financial institutions that the government would be unwise to implement major tax cuts at a time of high debt and low public spending.
In last autumn’s statement, the government announced a cut in national insurance from 12 per cent to 10 per cent, which is estimated to cost the Exchequer around £9.76 billion in the 2028 tax year.
But on Tuesday, the International Monetary Fund (IMF) said further tax cuts could threaten the government’s ability to invest money in the NHS and other vital services.
Mr Hunt said Peston on ITV Wednesday afternoon: “We go through a process before every budget and harvest statement where you don’t know the final numbers until a few weeks before. And we are still in the middle of that process.
“As things stand now – things can change – it doesn’t look like there will be the kind of space I had for those big tax cuts in the Autumn. And I mentioned that to the cabinet, yes.”
Mr Hunt is under intense pressure from colleagues to cut taxes further if he can, as the party continues to struggle in the polls. The Conservatives are currently trailing Labor by as much as 20 points.
Speaking earlier this month during a visit to the World Economic Forum in Davos, Switzerland, the chancellor said “the direction of travel” for the UK was to emulate successful low-tax economies.
But the economic picture means this looks more difficult for the chancellor. The IMF has downgraded the UK growth forecast for next year, it is expected to reach 0.6% this year, and 1.6% next.
That would make the UK economy the second-worst in the G7 this year and the joint third-worst performer in 2025.
Mr Hunt’s downfall follows a grim warning from Paul Johnson, director of the Institute for Fiscal Studies, who said promised tax cuts will need to be reversed quickly, as the rising cost of debt will make it harder to finance them.
Mr Johnson has since said Mr Hunt could only pay for tax cuts in March through cuts in public spending.
Tax could not be reduced “without a significant impact on public services”, Mr Johnson said Today on BBC Radio 4 programme, suggesting the chancellor would show where cuts to public services would have to fall to fund tax cuts.
Responding to an IMF briefing on Tuesday, Mr Hunt said it was “too early to know whether further tax cuts will be affordable in the Budget”.
Mr Hunt told the BBC that he agreed with the IMF that “targetless tax cuts that only make people happy” is not a good idea.
“But if those are smart strategic cuts, that’s a very important part of the strategy to grow the economy,” he said.
The Chancellor is under pressure to ignore the economic forecasts and push ahead with tax cuts from his colleagues, as former cabinet minister Sir David Davis has said Andrew Marr from LBC that the IMF should “get lost” because of its tax warning.
“We should stop listening to financial forecasts based on the bias of the people who write them,” he said.
The former Brexit secretary also said “there will be tax cuts, the question is how much”.
Speaking on LBC, Treasury Minister Laura Trott said the Conservatives would aim to cut taxes in a “sustainable and responsible way”:
“We spent £400 billion during COVID. We spent £100 billion on energy prices to protect people during the energy crisis caused by Putin.
“I think those were the right decisions. We have to pay that back. And a Conservative government will always be responsible for the people’s finances. And so we made some tough decisions.”
She said: “What the IMF is talking about is the balance of public spending against tax cuts. And this is a really important debate that we should be having in this country.”
Labor said the IMF warning was “yet more evidence of 14 years of Conservative economic failure”.
Shadow Treasury Secretary Darren Jones said: “Britain has been left with high debt, stagnant growth, high taxes and working people worse off.”
And the Liberal Democrats said the IMF’s “damning” verdict showed the government had “failed the economy”.
Lib Dem Treasury spokeswoman Sarah Olney said: “This Conservative Government is a disaster for our economy and must leave Downing Street before even more damage is done.”
