Chancellor Jeremy Hunt said the Conservatives would cut taxes again “if we can” in an attempt to boost growth and bolster the party’s flagging electoral prospects.
Speaking to the FT, the Chancellor said further tax cuts were on the table for an autumn fiscal event, but stressed it would depend on “responsible management of the economy”.
“Its something we’d like to do if we can. But it’s not something that we can possibly know whether it will be possible at this stage,” he said.
Hunt reduced National Insurance by 2p in last month’s Spring Budget, following a reduction of the same amount in the Autumn Statement. This has brought the basic rate of National Insurance down to 8p.
Despite the cuts, the tax burden is still expected to rise to 37.1 per cent of GDP in 2028-29, four percentage points higher than pre-pandemic.
The tax cuts have also done little to close the gap on Labour, who maintain a lead in the polls of around 20 points.
Hunt said that an improving economy, lower taxes and the prospect of interest rate cuts would help people to feel like they had “turned a corner” ahead of an election.
“As we now move through the year towards the autumn, some of the changes in economic policy, including lower taxes, will be felt in people’s pockets – and that’s clearly something that is significant for us,” he said.
Hunt’s attempts to sing the praises of a recovering economy were dealt a blow yesterday after the International Monetary Fund (IMF) downgraded its forecasts for the UK this year.
It now thinks the UK will grow 0.5 per cent this year, down from 0.6 per cent in its January forecasts. Next year, however, the IMF predicts the UK will be the fastest growing major economy in Europe.
The Washington-based body also called on governments to “rebuild fiscal buffers” given the uncertainty facing the global economy.
The Chancellor said his own tax cuts did not worsen the fiscal situation. “Every tax cut I’ve done has been on the basis of not increasing borrowing and not adding to pressure on funding for public services,” he said.