Jeremy Hunt today said lower interest rates could give him room to cut taxes in the spring Budget ahead of the general election.
The Chancellor insisted the Government plans to reduce the tax burden ‘if we are able to’ – but warned he will not know what is possible until the Office for Budget Responsibility’s forecasts next year.
His comments came as official figures showed the taxman collected £77.6billion last month – the highest figure for November since records began 30 years ago.
But the Government still borrowed £14.3billion as it continued to spend more than it earned, including a record £7.7billion on debt interest payments. The national debt now stands at almost £2.7trillion.
And in a headache for Mr Hunt, borrowing over the first eight months of the fiscal year totalled £116.4billion. That was £24.4billion more than in the same period last year – the second highest figure on record – and £6.3billion more than forecast.
Jeremy Hunt today said lower interest rates could give him room to cut taxes in the spring Budget ahead of the general election
His comments came as official figures showed the taxman collected £77.6billion last month – the highest figure for November since records began 30 years ago
But despite the continued strain on the public finances, analysts said the prospect of lower interest rates meant Mr Hunt would have room for pre-election tax cuts.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said the Chancellor’s ‘headroom’ could double to £25billion if borrowing costs fall as expected.
And Tory MPs urged Mr Hunt to use his spring Budget – likely to be the last before polling day – to lower the tax burden and bolster the Tories’ electoral chances. In an interview on Bloomberg TV, Mr Hunt said: ‘If debt interest payments go down then potentially that gives me more headroom… but I would never use it in a way that would compromise the battle against inflation. We would like to bring down the tax burden in a way that is responsible.’
Former home secretary Dame Priti Patel said Mr Hunt should unfreeze the tax-free allowances, as millions have been dragged into higher tax thresholds. She added: ‘The levels of personal taxation are far too high… I continue to urge the Government to look again to unfreeze the tax-free allowances and the higher rate allowance.’
Sir John Redwood, a former Tory minister, said ‘tax cuts now are essential for living standards’.
With inflation down from a peak of 11.1 per cent last year to 3.9 per cent, the Bank of England is expected to start slashing interest rates next year, with the first cut potentially coming in March. That will reduce the cost of Government borrowing, giving extra leeway to reduce the tax burden.
Former Cabinet minister Ranil Jayawardena said: ‘The government needs to be bold: it’s time to scrap inheritance tax.’
The Office for National Statistics said public borrowing reached £116.4billion in the eight months to the end of November – £24.4billion more than the same period in 2022.
Chief secretary to the Treasury Laura Trott said: ‘We are taking difficult decisions in the national interest to control our borrowing needs and improve productivity, so that we deliver the public services people need while keeping inflation down.’
Mr Hunt travelled to Bern yesterday to sign a financial services deal with his Swiss counterpart Karin Keller-Sutter aimed at easing UK firms’ access to the Swiss market and vice versa.
