The Chancellor of the Exchequer had been widely expected to cut taxes in Wednesday’s budget, in a move seen as a way of closing the gap on the main Opposition Labour Party ahead of elections…reports Asian Lite News
Finance Minister Jeremy Hunt talked down the likelihood of tax cuts in this week’s budget, pledging “prudent and responsible” measures “for long term growth”.
The Chancellor of the Exchequer had been widely expected to cut taxes in Wednesday’s budget, in a move seen as a way of closing the gap on the main Opposition Labour Party ahead of elections.
Rishi Sunak’s Conservative Party is trailing in the polls with pollsters predicting that Labour leader Keir Starmer in on track to win the keys to number 10 Downing Street at a general election later this year.
Voters, hit by a cost of living crisis, have repeatedly punished the Conservatives in a string of recent by-elections.
With the Bank of England’s main interest rate sitting at a 16-year high of 5.25%, millions of voters are also suffering from soaring mortgage repayments.
“It’s going to be a prudent and responsible budget for long term growth,” Hunt told Sky News television channel. Official data last month showed Britain had sunk into recession after the economy shrank in the final two quarters of 2023.
While economists predicted that the recession could be short-lived, the data has been a big setback for Sunak, who has placed economic growth as a key priority.
But Hunt said he would not cut taxes at the expense of future generations. “I think the most unconservative thing I could do would be to cut taxes by increasing borrowing,” he told the BBC.
“Because that’s just cutting taxes and saying that future generations have to pick the tax up,” he added.
Although he would not be drawn on tax measures expected in the budget, Hunt did announce an £800 million ($1.01 billion) package of technology reforms designed to make public services more efficient and reduce paperwork.
As part of the package, police will use drones to assess incidents such as traffic collisions and artificial intelligence (AI) will be deployed to speed up the results of cancer scans in the state-run National Health Service.
“There is too much waste in the system and we want public servants to get back to doing what matters most: teaching our children, keeping us safe and treating us when we’re sick,” Mr. Hunt said in a statement.
According to The Sunday Times, the Office for Budget Responsibility told Hunt on Wednesday that he has £12.8 billion of headroom to play with — more than £2 billion less than the figure the Treasury is said to have previously been basing its calculations on.
After a shallow recession in 2023, the economy looks set to grow only slowly in 2024 while demands are mounting for spending on stretched public services and investment. Debt has soared to almost 100% of economic output after the COVID pandemic and the surge in energy prices hammered the public finances.
Nonetheless, Hunt and Prime Minister Rishi Sunak are under pressure to cut taxes to help the party’s flagging fortunes before a national election expected later this year.
Many Conservative lawmakers say the budget represents the last chance of turning around the centre-left opposition Labour Party’s 20-point lead in opinion polls.
Speaking to Sky News on Sunday, Hunt said he would like to cut taxes further possibly as soon as Wednesday.
“What you saw in the Autumn Statement was a turning point, when we cut two pence off the National Insurance rate. We will hope to make some progress on that journey, but we’re going to do so in a responsible way,” Hunt told the broadcaster.
British bond markets went into a slump 18 months ago when former Prime Minister Liz Truss and finance minister Kwasi Kwarteng promised sweeping and unfunded tax cut plans which had to be quickly reversed by Hunt.
In November, he announced some cuts to business and payroll taxes but the overall tax burden is still rising, largely because thresholds for paying many taxes have not risen in line with inflation.
Media reports have speculated about possible cuts to income tax rates, another social security cut or the relaxation of the threshold freezes.
Budget experts have said Hunt might again claim that he can afford to cut taxes now by making unrealistic promises of a squeeze on public services that are already under huge strain.
Reports have also cited a possible tightening of tax rules for so-called “non-dom” residents on their overseas earnings.
Hunt focused on another way that he could carve out a bit more fiscal wiggle room, telling BBC television on Sunday he would “rethink our whole approach to public spending.” The finance ministry said on Saturday it planned to improve public sector productivity which would deliver up to 1.8 billion pounds ($2.3 billion) of worth of benefits annually by 2029.
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