Chancellor Jeremy Hunt Discusses Lower Taxes in Responsible Way
In an interview with the BBC’s Sunday with Laura Kuenssberg program, Chancellor Jeremy Hunt expressed his desire to move towards lower taxes in a responsible manner. While some Tory MPs are pressuring him to reduce taxes in the upcoming Budget, Hunt emphasized the importance of avoiding tax cuts through increased borrowing, stating that it would be “unconservative.” Instead, he aims to demonstrate a path towards a lower-tax economy that is both responsible and prudent.
The Chancellor’s remarks come at a crucial time, as the Budget is set to be announced in just 72 hours. Hunt had previously hinted at further tax reductions but has recently acknowledged that there may be less room for such cuts than initially anticipated. Despite the main rate of National Insurance being reduced from 12% to 10% in last year’s Autumn Statement, overall tax levels are still on track to reach record highs.
At the beginning of the year, the Office for Budget Responsibility (OBR) estimated that Hunt had approximately £30 billion of “headroom” to spend in the Budget. However, borrowing costs have since risen, and the available funds have decreased to around £13 billion. With pressure from both spending rules and Tory backbenchers advocating for tax cuts, Hunt finds himself in a challenging position.
Despite the constraints, there is a widespread expectation that some taxes will be reduced in the Budget, albeit not significantly. However, critics argue that any tax cuts are likely to be undone after the next election, regardless of the winning party. The Institute for Fiscal Studies (IFS) has warned that further tax reductions could lead to future spending cuts.
When asked about public services and tax cuts, Hunt emphasized the need for better public services and a lower tax burden. He believes that achieving this requires more efficient spending on public services rather than increased spending.
The government has already announced an £800 million package of reforms aimed at freeing up NHS and police time. These reforms include the use of Artificial Intelligence (AI) to reduce NHS scan times and drones to assess incidents like traffic collisions. However, former chief economist at the Bank of England, Andy Haldane, argues that the government’s self-imposed spending limits, known as “fiscal rules,” are hindering economic growth and limiting the Chancellor’s decisions.
In addition to tax cuts, Hunt is considering other measures to raise revenue, such as implementing a new tax on vapes and scrapping non-dom tax status. Non-domiciled individuals are UK residents whose tax home is abroad, allowing them to avoid paying UK tax on overseas income. While Hunt has previously defended this tax status, arguing that it attracts wealthy individuals to the UK, Labour has pledged to abolish non-dom status and allocate the generated funds to schools and the NHS.
As the Budget approaches, there is anticipation and speculation about the specific tax changes that will be announced. However, Hunt assured the public that there would be no gimmicks in Wednesday’s Budget, emphasizing the need for responsible and transparent fiscal decisions.
Overall, Chancellor Jeremy Hunt’s discussion on lower taxes in a responsible manner highlights the delicate balance between reducing taxes, maintaining fiscal stability, and delivering efficient public services. With pressure from various stakeholders and limited resources, the upcoming Budget will undoubtedly be a critical moment for the UK economy.