- Jeremy Hunt: Tax cuts unlikely
- UK’s high debt challenges
- Inflation and fiscal considerations
Chancellor Jeremy Hunt has stated that delivering tax cuts will be “virtually impossible” until the UK economy shows signs of improvement.
With a less pessimistic economic outlook and the rising cost of living, there have been calls for tax reduction measures in the Autumn Statement scheduled for November.
During an interview on LBC, Mr. Hunt acknowledged that the country’s substantial debt levels have placed him in a position of making “very difficult decisions.”
The UK’s national debt, which finances government spending, has reached levels not witnessed since the early 1960s. As the national debt increases, the government has to pay more in interest, and recent interest rate hikes have further escalated this cost.
In the backdrop of the Conservatives lagging behind Labour in polls, there’s an ongoing debate about what actions the party can take to regain popularity before the anticipated general election, likely in May.
Many Conservative MPs argue that maintaining historically high tax levels, particularly given the soaring cost of living, is a political misstep. They advocate for tax cuts or, at the very least, a clear plan for achieving them.
While a slight drop in inflation last month led the Bank of England to keep interest rates at 5.25% after two years of gradual increases, Chancellor Hunt mentioned that the cost of servicing the nation’s debt remains higher than when he presented the Spring Budget in March. This means there is no “extra headroom” for tax reductions.
Hunt emphasized the need to stick to the plan of reducing inflation and interest rates to bring down long-term debt costs, although he noted uncertainty about when this might occur and expressed doubt that it would happen before the November 22nd Autumn Statement.
Considering the recent figures showing inflation at 6.7% in August, tax cuts could stimulate economic demand and potentially push prices higher, making the government cautious about such measures for now.