Chancellor Jeremy Hunt 'warns Tories he can't make big tax cuts they want'
Jeremy Hunt has reportedly warned top Tories that long-trailed tax cuts in the Budget are likely to be smaller than expected.
The Chancellor is drawing up plans for the Budget in March, which is being seen as a last-chance moment to revive dire Conservative fortunes before the next election. Mr Hunt has been hinting heavily that he would like to slash taxes further after cutting National Insurance in the last Autumn Statement.
But he told Cabinet on Tuesday there was likely to be less headroom for tax cuts than in the Autumn, according to The Times. He blamed relatively low levels of productivity in Britain, which he described as “our major structural weakness". “We are not likely to have as much room for tax cuts as we had in the Autumn,” he said.
It comes after the International Monetary Fund warned the Tories that any further tax cuts would damage the Government's ability to invest in public services like the NHS. In another blow, the international body also downgraded its growth forecasts for the UK economy to 0.06%. It made the UK the second worst performing economy in the G7.
IMF chief economist Pierre-Olivier Gourinchas said: “We would rather they [the UK Government] not do this type of tax cuts.” He said ministers “might think of spending on healthcare and modernising the NHS; spending on social care; on education; you might think about critical public investment to address the climate transition; but also to boost growth.”
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Responding to the verdict yesterday, Mr Hunt said: "The IMF expect growth to strengthen over the next few years, supported by our introduction of the biggest capital investment tax reliefs anywhere in the world, alongside National Insurance cuts to improve work incentives. It is too early to know whether further reductions in tax will be affordable in the Budget, but we continue to believe that smart tax reductions can make a big difference in boosting growth.”
Economists say the fact the Government borrowed less than expected in December might give Mr Hunt the room to cut taxes further in the Budget on March 6. Cuts to National Insurance and income tax are among the options on the table.
But Office for National Statistics figures in December showed debt levels are higher than they have been since the 1960s when compared with the size of the economy.
Health minister Dame Andrea Leadsom told LBC: "I am a big fan of tax cuts but obviously I am not the Chancellor and cannot predict what steps he will be taking at the spring statement, which is quite soon now. But he will be looking to enable people to keep more of their hard earned cash if he possibly can."
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