Economists call for tax cuts after figures show Chancellor will hit borrowing target

JEREMY Hunt came under fresh pressure to cut taxes as soon as possible yesterday after figures showed he was on course to meet his annual borrowing target with billions to spare.

Treasury coffers have been boosted by a haul of self-assessment tax receipts and soaring inheritance tax payments.

But the Chancellor played down calls to cut taxes sooner. He told a Lords committee: ‘I don’t think we are in a position to make any assessment as to how soon it will be that we can bring down the tax burden on families – but it will always be a priority for me.’

He said suggestions he has more room for manoeuvre than expected should be taken ‘with a large pinch of salt’. Office for National Statistics figures yesterday showed borrowing, the shortfall between tax income and spending, hit a higher than expected £16.7billion last month, due to spending on high energy bills.

But economists said the Government was set to undershoot the Office for Budget Responsibility (OBR) forecast last week, which predicted borrowing for this financial year would hit £152billion.

Ruth Gregory, of Capital Economics, said: ‘Despite February’s worse-thanexpected public finances figures, we still think the Chancellor may have more headroom to cut taxes or raise spending later this year.’

February’s borrowing lifted public sector debt to £2.51trillion. But tax take is rising, as thresholds for paying income and inheritance taxes are frozen amid double-digit inflation.

Julian Jessop, of the Institute of Economic Affairs think-tank, said ‘borrowing remains on track to undershoot the OBR forecasts’ as a result of higher tax revenues. He added: ‘This is another argument for tax cuts – and sooner rather than later.’

Self-assessment income tax receipts were £24.5billion for January and February. Self-assessed capital gains taxes were also a record £15.8billion.

With inheritance tax for the year to date standing at £6.4billion and borrowing for the 11 months to February being £132billion, experts say full-year borrowing is likely to be less than the forecast £152billion. But the OBR said ‘uncertainties remain considerable’.