Tax cut is unlikely – Jeremy Hunt
Jeremy Hunt has warned it is “unlikely” that there will be room for any “significant” tax cuts in the Budget.
The chancellor has been under pressure recently from some in his party to cut taxes to stimulate the UK economy.
But Mr Hunt said that a pledge to halve the rate of inflation “is the best tax cut right now”.
He admitted the UK was going through “a difficult patch” but insisted the country “can get through it and we can get to the other side”.
On Friday, Mr Hunt set out a plan to help lift the UK’s economic growth.
After a turbulent autumn, when financial markets pushed up the country’s cost of borrowing, Mr Hunt said he was determined to show that the UK was responsible.
That meant “showing the world, showing the markets that we are a responsible nation, that we can pay our way, that we can balance our books”, he said.
He added that “it is unlikely that we would have the room for any significant tax cuts” at the Budget in March.
Government borrowing – which is the difference between spending and tax income – rose to a record £27.4bn in December. It was the highest amount for that month since 1993.
Borrowing was driven by the cost of helping households and businesses with rising energy bills. Higher inflation also pushed up interest payments on debt owed by the government.
The rate of price rises – or inflation – has begun to slow, but at 10.5% remains close to a 40-year high.
Prime Minister Rishi Sunak has pledged to halve inflation by the end of the year.
But some economists have said prices will begin to fall back naturally, without government policies, due to commodity prices and shipping costs decreasing towards the end of last year. Energy prices are also expected to ease in the second half of 2023.
Mr Hunt said: “The biggest tax cut that we can give the British people is to halve inflation, that means the value of their weekly shop won’t continue to go up, the value of their pay packet won’t continue to be eroded and that’s what we are focused on.”
Four ‘Es’
The chancellor also unveiled a plan to grow the UK economy, though it drew a mixed reaction with some business groups criticising a lack of detail.
He said the strategy would focus on four pillars, or “four Es”: enterprise, education, employment and everywhere.
He said that while it was not a series of measures or announcements, it would provide “the framework against which individual policies will be assessed and taken forward”.
But the Institute of Directors (IoD) suggested Mr Hunt add a fifth E for “empty” after not issuing concrete plans.
IoD chief economist Kitty Ussher said businesses needed “government action to counteract the negative mood”, such as continuing the capital investment super-deduction and bringing in tax credits for employers who invest in skill shortage areas.
Mr Hunt said the government planned to achieve growth in multiple sectors across the UK, including digital technology, green industries, life sciences, advanced manufacturing and creative industries.
The TUC said the lack of the mention of public sector pay in the speech was the “elephant in the room”.
“Public servants will be deeply worried about the chancellor’s warnings of further restraint. We know that is usually code for cuts,” said the union’s general secretary Paul Nowak.
Craig Beaumont, of the Federation of Small Businesses, said the contents of Mr Hunt’s speech had “all the right elements”, but warned the “proof will be in the pudding in the years ahead”.
