Less scope for tax cuts in budget

Jeremy Hunt hasn’t poured cold water on the chances of tax cuts in the March Budget announcement, but he has revealed that there is less scope to implement tax cuts than he hoped there would be previously. The news broke – along with further comments reported below - when the Chancellor recently spoke to the BBC¹.

The Chancellor believes in tax cuts

The Chancellor has aimed to help reduce the cost-of-living crisis on taxpayers and grow the UK economy by reducing taxes. Although, he also stated that this can only be achieved in a “responsible way”. Jeremy Hunt did reduce tax in last year’s Autumn Budget announcement by reducing the main form of National Insurance from 12% to 10%.

Throughout January, there were more signs and murmurs that the Chancellor would make a similar move in the March announcement. Jeremy Hunt even attended the World Economic Forum in Davos, Switzerland and was quoted as saying “[…] countries with lower taxes have more "dynamic, faster-growing economies"¹.

All the signs pointed to a pending tax cut of some type in the March Budget announcement, but this has been turned on its head due to recent reports and comments from the Chancellor as March draws closer.

Tax cut U-turn or hands tied?

The Times has reported that Jeremy Hunt told the cabinet that there is now less room to make tax cuts in the coming Budget². He cited low productivity within the economy and economic structural weaknesses as the reasons he would not be able to execute a more significant tax cut on March 6th when the Budget is made public.

However, the Chancellor hasn’t completely shut down the idea of some type of tax cut. When pressed about the matter on a recent BBC political podcast episode, he stated that no decision had been finalised and that he was awaiting figures from the Office for Budget Responsibility (OBR) before deciding on what is best for the UK. The OBR provides the government with forecasts – including inflation data – prior to Budget announcements to aid decision-making.

Nevertheless, Jeremy Hunt did state that even if the current situation doesn’t allow him to make the tax cuts he would ideally like to make, then he wanted to send a clear message to the public that reducing the burden of taxes is his long-term strategy¹. This will please the general public who want an easing to their finances, as well as Conservative MPs who see tax cuts as a way to make up ground on Labour’s projected lead. The Chancellor then, may just be implementing an expectations management strategy in the meantime.

We will bring you the latest budget announcement and any tax cuts as soon as they happen. For more help in understanding the economy and its effect on your mortgage repayments, don’t hesitate to speak to our qualified advisers.

Sources

1.    https://www.bbc.com/news/uk-politics-68159003
2.    https://www.thetimes.co.uk/article/imf-warns-tories-against-cutting-taxes-before-election-2vlps09pg

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February 2024