Chancellor Jeremy Hunt has said there will be less room for tax cuts in the spring budget next month, just days after the International Monetary Fund warned that the UK needed to focus on repairing its public finances.
Hunt, who in November announced he was cutting the main rate of national insurance contributions paid by employees from 12% to 10%, was widely believed to be gearing up for another tax giveaway after dropping a series of hints about what could be the Conservatives’ last budget before a general election.
However, the chancellor said he needed to manage expectations. “It doesn’t look to me like we will have the same scope for cutting taxes in the spring budget that we had in the autumn statement,” Hunt told the BBC’s Political Thinking with Nick Robinson podcast.
“And so I need to set people’s expectations about the scale of what I’m doing, because people need to know that when a Conservative government cuts taxes, we will do so in a responsible and sensible way.”
The comments are likely to disappoint some Conservatives, including party MPs who have been calling for more giveaways before they go head-to-head with Labour in elections. But Hunt stressed the government needed to think long term.
“It is not Conservative to cut taxes by increasing borrowing because all you’re doing is cutting the taxes paid by people today in exchange for increasing the taxes paid by our children tomorrow.”
His comments come days after the IMF issued a strong warning to the chancellor against cutting taxes in his 6 March budget, noting that any tax giveaways would probably require extra borrowing or post-election spending cuts.
The Washington-based fund stressed the government should focus on boosting key areas of public spending instead, and repairing public finances after the damage caused by the pandemic and the war in Ukraine.
Hunt said he agreed with the IMF that “untargeted tax cuts that are just crowd pleasers” were not a good idea, in a thinly veiled reference to Liz Truss’ disastrous mini-budget in September 2022, when unfunded tax cuts roiled markets and sent UK borrowing costs surging.
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“But if they are strategic, smart tax cuts then that is a very important part of the strategy to grow the economy,” he added.
Hunt stressed that tax cuts were still a key priority for a Tory government. “We also want to be clear that the direction of travel we want to go in is to lighten the tax burden.”
