Chancellor Jeremy Hunt hopes to implement further tax cuts before this year’s general election believing it is the shortcut way to enhance the UK economy, which may be announced in Hunt’s March budget 2024.
This ‘crowd-pleasing measure’ may be possible as the UK government borrowing in December showed to be much lower than the projected £14 billion debt prediction by the Office for Budget Responsibility, as the debt only amounted to £7.8 billion. This is the lowest record for the month of December since 2019, as per the Office for National Statistics.
Jeremy Hunt had hoped for more ‘headroom’ to wiggle for further tax trimming, being left with a projected sum of £13 billion since the last Autumn Statement’s tax cuts. With the government’s reduced interest rate payments, and potential cut of interest rates in 2024 by the Bank of England, Hunt’s fiscal headroom could reach up to £20 billion.
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The chancellor must wait for the OBR’s fiscal and economic forecasts to finally determine whether to implement tax cuts or not in March, and if so, how much.
Treasury Chief Secretary Laura Trott added positive remarks to this plan saying that the inflation has more than halved and the economy is “now beginning to turn a corner.” That “debt is on track to fall as a share of the economy” and “we have been able to afford tax cuts for 27mn working people, and an £11 billion tax cut to drive business investment,” Laura said.
However, some other economists believe that another tax-cut measure may be a reckless move due to the UK’s massive lack of budget and huge debt responsibilities. Nevertheless, if the measure is to be pursued, that would most likely mean a 1 per cent income tax reduction, costing the UK government £7 billion per year.
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Jeremy Hunt’s hopes for budget tax cuts get a boost. (23 January 2024). Retrieved from Sky News: https://news.sky.com/story/hunts-hopes-for-budget-tax-cuts-get-a-boost-13054435
Sharp fall in UK government borrowing in December raises prospect of Budget tax cuts. (n.d.). Retrieved from Financial Times: https://www.ft.com/content/8e763140-a0ed-4d73-a86c-e06791568b3a