Tax cuts in Budget will not be as large as the autumn's, Jeremy Hunt warns

Jeremy Hunt
Mr Hunt appeared to be downplaying expectations - Kirsty O'Connor/HM Treasury

Jeremy Hunt has publicly warned that the tax cuts set to be unveiled in the Spring Budget will not be as large as the ones announced in November.

Speaking on ITV’s Peston program, the Chancellor said: “It doesn’t look like I’ll have the kind of room that I had for those very big tax cuts in the autumn.”

The remark came after the Treasury was handed the first round of estimates from the Office for Budget Responsibility [OBR] ahead of the Budget on March 6.

While the figures are kept private, it is understood the OBR said currently the so-called “fiscal headroom” - money that the Chancellor has to spend while reducing government debt - would be around £14bn a year.

That is far below the £35bn that had been available to Mr Hunt ahead of the Autumn Statement in November, which had swelled as inflation pushed up tax receipts.

The message from Mr Hunt was significant as it appeared to be an attempt to downplay expectations among Tory MPs clamouring for vast tax cuts to boost their electoral chances.

Robert Jenrick, the immigration minister who quit the Cabinet before Christmas over the Rwanda Bill, on Wednesday urged Mr Sunak to reduce stamp duty to boost the property market.

‘Countries with lower taxes grow faster’

Cuts to income tax and national insurance are seen as the leading options for the Budget by Downing Street insiders, but changing economic forecasts could limit their ability to act.

Mr Hunt confirmed that he had delivered the same message about the difficulty of cutting tax as much as in the Autumn Statement at a Cabinet meeting on Tuesday.

In that package of measures Mr Hunt reduced National Insurance and also delivered a major business tax cut by making so-called “full expensing” permanent.

His new public message was the same one delivered by Mr Hunt to the 1922 Committee of Tory backbenchers on Wednesday night.

But in the ITV interview the Chancellor also talked up the need for low taxes: “We look around the world and we notice that countries with lower taxes, predominantly in Asia and North America, tend to be growing faster than countries with higher taxes, which are mainly in Europe.

“So we do think if we’re going to have a dynamic economy that pays tax revenues, that gives the NHS the funding it needs, the care system, the armed forces, our schools and so on, we do need to move in the direction of being lower taxed.”

At Prime Minister’s Questions on Wednesday, Mr Jenrick had challenged Mr Sunak to slash stamp duty.

Mr Jenrick said: “A first responsibility for Government is to fix the housing crisis that young people didn’t cause.”

He said the Conservative Party had “dragged housebuilding” to the “highest levels since 1987” and said Labour “left it at its lowest level since the 1920s”.

But he added: “Housebuilding is weakening. We need to do more. Will (the Prime Minister) consider using the budget to do as he and I did together during the pandemic and cut stamp duty to boost housing starts, to reignite the economy and to support thousands of businesses across our country?”

Mr Sunak responded: “Since 2010 we have delivered two and a half million additional homes, on track to deliver a million just in this Parliament and help over 850,000 families into homeownership through schemes such as help-to-buy and right-to-buy.

‘‘Obviously, tax decisions are a matter for the Chancellor. But I would point out that our existing stamp duty relief for first-time buyers ensures the vast majority of first-time buyers in our country pay absolutely no stamp duty.”

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