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Tax cut could boost Britons' finances before a general election as 2p drop hinted at

Chancellor Jeremy Hunt has raised the possibility of further tax cuts before the next general election.

He has fuelled speculation that he might announce a third 2p cut in the rate of National Insurance on working Britons.

Two earlier cuts announced in the autumn and the spring are predicted to save workers some £900 a year while a further 2p reduction would bring the total value of the cut to £1,350, the FT reports.

A further reduction in NI this coming autumn would fit in with the Chancellor’s ambition to abolish NI completely over time.

In an interview with the Financial Times, Mr Hunt said the government would like to cut taxes in an autumn fiscal event “if we can”.

He insisted it is too soon to know if it would happen and stressed the need to act in a fiscally responsible way.

The Chancellor also highlighted how market forecasts pointed to Bank of England rate reductions in the summer or autumn as inflation subsides, saying this meant people would feel the economy had “turned a corner later this year”.

He said: “As we move through the year towards the autumn, some of the changes in economic policy, including lower taxes, will be felt in people’s pockets — and that’s clearly something that is significant for us.”

Any further cut will intensify questions over how it will be paid for, while also setting a trap for Labour.

As things stand substantial cuts to government departments and public services are pencilled in following the next election.

Mr Hunt was speaking at the start of a trip to the US in which he will promote the idea that the UK is shrugging off a period of high inflation and stagnant growth.

He is due to meet counterparts in Washington as the IMF and World Bank hold their spring meetings and policymakers weigh the prospects of a modest global recovery this year.

The FT said Mr Hunt’s narrative suffered a blow on Tuesday after the IMF forecast in its latest World Economic Outlook that UK gross domestic product would grow by a disappointing 0.5 per cent this year — 0.1 point slower than the organisation’s January prediction.

The IMF urged advanced economies to do more to rein in public borrowing, calling on them to build up their buffers against future economic downturns and bring debt under control.

That came after the IMF in January warned the UK against further tax cuts, urging it instead to curb borrowing and prioritise spending in areas such as health and education.

Hunt said he was not in the business of making tax cuts that made the country’s fiscal position worse, insisting they were designed to increase growth.

“Every tax cut I’ve done has been on the basis of not increasing borrowing and not adding to pressure on funding for public services, and that will continue,” he said.

Asked if further tax reductions were possible, Hunt argued that one of the “big divides” in UK politics was over taxation.

He claimed Labour was happy with the status quo on taxes, while the Conservatives “look around the world and we say that countries that are growing faster tend to have lower tax burdens and we want to bring the tax burden down”.

The Chancellor added: “We’ll do so in a way that is responsible” and added it is “too early” to say if an autumn fiscal event would have sufficient budgetary headroom for tax reductions, and that any cuts would only be made if they did not damage public services.

He said: “It’s something we’d like to do if we can. But it’s not something that we can possibly know whether it will be possible at this stage.”

Despite the recent cuts in NI the total tax burden on the nation is predicted to hit 37.1 per cent in 2028-29, which would be 4 points higher than before the pandemic, driven by personal tax measures and an increase in corporation tax.


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