The Tory party’s plan to further cut taxes in the Spring Budget is not exactly a secret. Still, Jeremy Hunt’s suggestion at Davos that they are indeed coming has sparked imaginations – while his party continues to debate internally where these tax cuts should land.
Speaking on a panel at the World Economic Forum’s conference in Davos, Switzerland, the Chancellor gave his biggest indication yet about his priorities for the upcoming fiscal statement. ‘We note that the economies growing faster than us in North America and Asia tend to have lower taxes,’ he said. ‘I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS.’
Of course, Hunt was careful to couch any talk of tax cuts by noting that whatever he does has to be possible within the scope of the public finances. ‘It is too early to say what we are going to do,’ he noted, while also being clear that ushering in lower taxes is the ‘the direction of travel we would like to go in’. Hunt used up almost all of his £27 billion fiscal windfall in the autumn to make full expensing for businesses permanent and take 2p off employee National Insurance. He will soon get more information from the Office for Budget Responsibility about what his fiscal headroom might be this time around. The billions he has to work with will help determine whether he opts for some kind of income tax cut (the direction the government has been leaning in recent months, as it would be perceived as the tax cut to help the most people), a reduction in inheritance tax or – as some Tory MPs are hoping – a combination of the two.