Personal tax cuts still top priority in Budget, says Hunt

PERSONAL tax cuts remain the Chancellor’s priority at next month’s Budget despite a gloomy economic picture, the Mail understands.

Jeremy Hunt was dealt a double blow this week after official estimates suggested he has just £13billion of fiscal headroom, and data showed Britain slipped into a recession last year.

But sources pushed back on speculation that he now cannot afford a 2p cut in income tax at the Spring Budget, saying he would use any scope to lighten the burden on workers.

Mr Hunt receives weekly headroom figures from the Office for Budget Responsibility, with three more forecasts due between now and his announcement on March 6. The numbers can vary wildly – but the latest left him looking at a public spending squeeze to find an extra £5billion to £6billion to provide relief to families. A Government source said: ‘The priority has got to be personal taxation, that is what we are going to use our headroom on. Because the public don’t respond to talk about billions here or billions there in economic growth, they care about money going directly into their pocket.

‘It’s been a really tough two or three years, but if people are getting an extra £60 a month in their pay pocket because of the National Insurance cut then they feel better off.’

Treasury sources insisted that any money available would be prioritised for families over business tax cuts at the Budget – provided they are affordable.

In the Autumn Statement, Mr Hunt announced the biggest business tax cut in modern history with permanent full expensing – which allows firms to claim back the cost of investment against tax liabilities – alongside a business rates support package.

He also unveiled a 2p cut in National Insurance, which came into effect last month, saving millions of workers hundreds of pounds a year.

Mr Hunt is facing intense pressure from Tory MPs to cut taxes at the Budget in an

‘Life has been very, very tough’

attempt to save the party from electoral oblivion.

The Treasury is adamant the Government will only cut taxes if it is affordable, and is cautioning MPs that they will not be able to match the scale of the Autumn Statement.

But former Cabinet minister David Jones said the gloomy economic picture highlighted the need for a giveaway.

He argued that the Government ‘needs to kick start the economy by reducing the tax burden on both businesses and individuals. The Chancellor must make it his priority to do so at the forthcoming budget on March 6’.

Cutting 2p off National Insurance would cost around £9billion a year, while 2p off income tax would cost around £13billion – eating away all of the headroom currently estimated by the OBR.

Mr Hunt is likely to want to include a range of measures in the Budget – rather than one big giveaway – and will leave a financial buffer.

The Office for National Statistics estimated that gross domestic product fell by 0.3 per cent in the last three months of 2023, following a decline of 0.1 per cent in the previous three months.

Mr Hunt has insisted there is ‘light at the end of the tunnel’ if the Government sticks to its plan.

Asked whether it was complacent to play down the data, the Chancellor replied: ‘ Far from that, we recognise life has been very, very tough for families up and down the country.’