Hunt plans 2p cut to taxes on income
Second home owners among possible targets in push for giveaways in the ‘do or die’ Budget
JEREMY Hunt is poised to cut 2p off personal taxes this week to revive Tory electoral fortunes.
The Chancellor and Rishi Sunak were locked in talks last night over spending cuts and revenue-raising measures to free up cash to pay for a headline-grabbing tax cut in Wednesday’s Budget.
Planned public spending will be squeezed and a series of small tax-raising measures is being considered to release £10billion for big-ticket tax cuts.
The scramble for cash came after the Office for Budget Responsibility (OBR) ruled last week that Mr Hunt’s original tax-cutting plans were ‘unaffordable’ unless more money was found to pay for them.
The watchdog warned he had only about £6billion to play with – a tiny amount compared to Government spending of more than £1trillion a year. Mr Hunt confirmed yesterday that forecasts had ‘gone against us’.
In the dash for cash, he is expected to raise £2billion by curbing tax breaks for wealthy non- doms – those who declare their main home is abroad for tax purposes, despite having criticised similar Labour plans. Another £ 500million will be raised by taxing vapes and increasing taxes on cigarettes.
Other possible tax rises include a raid on second-home owners who let their properties, higher air passenger duty on business flights and extending the windfall tax on oil and gas firms.
Trimming planned public-sector growth after the election could free up a further £5billion.
Mr Sunak has rejected Treasury proposals to tinker with the pension triple lock, but a string of other small tax rises were under consideration.
One senior Tory said last night it was ‘not the Budget we had hoped to be delivering’.
Former Tory Cabinet minister Sir John Redwood added: ‘We do not need new taxes to cut other taxes. We need less wasteful public spending and more growth.’
He also queried plans to spend £800million boosting public-sector productivity. The Treasury claims it will yield benefits of £1.8billion in the long run, but he said it was ‘strange to start a taxcutting budget with announcements of extra spending’.
Tory MPs have criticised the OBR for effectively setting the framework for the Chancellor’s decisions by forecasting the leeway he has to meet fiscal rules.
The last time a Chancellor reached for late tax rises to balance his plans was in George Osborne’s so-called ‘omni-shambles’ Budget in 2012, when modest new taxes on pasties, caravans and church repairs had to be dropped following an outcry.
Former Bank of England chief economist Andy Haldane said the Government’s fiscal rules were too focused on cutting debt and were ‘stunting growth’.
But in downbeat TV interviews yesterday, Mr Hunt said the Government had a duty to handle public finances responsibly. He told the BBC’s Sunday With Laura Kuenssberg: ‘The most un-Conservative thing I could do would be to cut taxes by increasing borrowing – that’s just cutting taxes and saying future generations have to pick up the tax.
‘I won’t do that, but I do want, where it’s possible to do so responsibly, to move towards a lower-tax economy and I hope to show a path in that direction.
‘But this will be a prudent and responsible budget for long-term growth – tackling inflation, more investment, more jobs and that path to lower taxation as and when we can afford it.’
Research by the think-tank More In Common yesterday found Britons favour cuts to income tax and council tax above other potential Budget measures – and that most voters blame ministers for the recession. Director Luke Tryl, a former Tory adviser, called the Budget a ‘do or die’ moment for the Tories.
Mr Sunak wants a 2p cut in income tax to show the Tories are serious about reducing the record peacetime tax burden.
But it would cost £14billion, and some insiders believe he will have to settle for reducing National Insurance by a similar amount, which would cost £10billion but help fewer people.
Dennis Reed, of the pension campaign group Silver Voices, said the Chancellor ‘won’t win a single older voter back’ if ‘all he does’ is cut National Insurance.
Meanwhile, the Chancellor is to set aside £360million this week for R&D to make the UK a ‘world leader in manufacturing’.
‘Less wasteful public spending’