Jeremy Hunt has warned cabinet that there is less likely to be less opportunity for tax cuts in the Budget, compared to last year.
The Chancellor, according to The Times, reportedly told colleagues: “We are not likely to have as much room for tax cuts as we had in the autumn.”
While the PA news agency reported that he pointed to “major structural weaknesses” in the UK economy, and stressed that the US, France and Germany are all more productive.
It comes just after the International Monetary Fund (IMF) warned on Tuesday that further tax cuts could put investment in the NHS and public services at risk.
Hunt announced cuts to national insurance contributions from 12 per cent to 10 per cent in the autumn statement in November, which came into force on January 6 this year.
The Office for Budget Responsibility (OBR) said it would cost around £9.76bnin the 2028 tax year, while the Treasury stressed that workers on £35,000 would be £450 better off a year.
Prime Minister Rishi Sunak is expected to hold an election in the second half of the year, and he and Hunt have been hinting at further tax cuts to come ahead of a public ballot.
The Conservatives are currently trailing Labour by around 20 points in the polls, and Tory MPs are eager to see further tax reductions as a retail offer to the public.
Responding to the IMF’s briefing on Tuesday, Hunt said it was “too early to know whether further reductions in tax will be affordable in the Budget”.
But the IMF has also downgraded the UK’s growth forecast to just 0.6 per cent this year, and 1.6 per cent next, making it the second-worst in the G7 in 2024 and the third-worst in 2025.